Responding to RBI's decision to inject more liquidity, the rupee on Monday gained a whopping 82 paise to end at a three-week high of 48.64/65 against the American currency.
Dealers in foreign exchange said rupee was aided by slackness in demand for dollar. Strong equity markets also bolstered the domestic unit, they added.
The Indian currency reversed its losing-spree of the past many weeks during which it had hit an all-time intra-day low of 50.15 a dollar (on October 24). Rupee started gaining continuously as the equity markets sustained their rally with the benchmark Sensex gaining 1,828 points since October 28.
The Interbank Foreign (forex) market on Monday witnessed fairly good activity during the day with the domestic currency moving in a range of 48.64 and 49.07.
It opened the day firm at 49.04/05 a dollar from its previous close of 49.46/47 a dollar.
Dealers said foreign banks in the afternoon trade heavily sold dollars which were partly absorbed by importers.
On November 1, the Reserve Bank of India slashed the Cash Reserve Ratio (CRR) by one per cent and the repo rate by 0.5 per cent. The apex bank also reduced the Statutory Liquidity Ratio (SLR) by one percentage point to 24 per cent. All these measure would inject an estimated Rs 85,000 crore into the system.
Meanwhile, the Indian benchmark Sensex soared by another 550 points, or 5.62 per cent, raising hopes that Foreign Institutional Investors (FIIs) may return to equity markets.
Asian indices too were up by about 2.0 to 5.0 per cent. The RBI, however, fixed the reference rate for dollar at Rs 48.96 and for the single European currency at Rs 63.08.The rupee premiums on forward dollar ended lower due to sustained receivings by exporters.
The benchmark six-month forward dollar premium payable in April ended at 46-49 paise, lower from 52-1/2 - 54-1/2 paise on Friday and far-forward maturing in October also closed down at 70-73 paise from 74-76 paise previously.
In cross-currency trades, the rupee also appreciated sharply against the pound sterling, the euro and the Japanese yen.
The domestic currency spurted against the pound sterling to end the day at Rs 78.71/73 per pound from last weekend's close of Rs 80.22/24 per pound and also firmed up against the single European currency to Rs 62.47/49 per euro from its previous close of Rs 63.06/08 per euro.
The rupee ended stronger against the Japanese yen at Rs 49.10/12 per 100 yen from its last close of Rs 50.56/58 per 100 yen.