The rupee on Thursday bounced back to 51-level after five-and-a-half months by gaining 42 paise to close at 51.74 against the US dollar stocks amid hopes that the Cabinet will clear the next wave of big-ticket reforms which is expected see a rush of capital inflows.
The rupee's fortunes were boosted by persistent dollar selling by exporters and banks amid weak global trends of investors offloading the US currency ahead if interest rate decisions by Bank of England and the European Central Bank.
The rupee opened higher at 52.00 a dollar against last close of 52.16 at the Interbank Foreign Exchange (Forex) market today and immediately touched the day's low of 52.10.
However, riding high on FII inflows of nearly Rs 950 crore ($180 million), the rupee recovered its lost ground to rebound to a high of 51.66.
Banks and exporters preferred to reduce their dollar position in view of persistent capital inflows from foreign funds into equity market and expectations of fall in dollar value overseas. The rupee finally closed at 51.74 - up 42 paise or 0.80 per cent against Wednesday's close of 52.16.
This is its highest closing since April 17, 2012, when it had settled at 51.47. Helped by a weak dollar and capital rush, the rupee has jumped by a whopping 177 paise or over 3.3 per cent in the last five straight sessions.
"Expectations of more reforms by government are boosting the sentiment in the local market. Even though global markets are not doing much, rupee recovered immensely against dollar," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
The Indian stock market benchmark Sensex on Thursday extended its gains for the fourth consecutive trading session and closed up by 188.46 points above the 19K level.