The rupee on Thursday surged by 50 paise, logging its steepest single-day gain in seven months, to close at 63.11 against the US dollar, in tune with strong recovery in stocks after the volatility in currency, equity and commodity subsided in the United States.
Fresh dollar selling by exporters and some banks also aided the rupee.
At the Interbank Foreign Exchange (Forex) market, the rupee commenced higher at 63.35 a dollar from its previous close of 63.61 and immediately touched 63.39.
In tandem with a sharp rise in the domestic equity market, the rupee settled at 63.11 with a gain of 50 paise (or 0.79 per cent).
The volatility subsided in the US after Federal Reserve chair Janet Yellen said the US central bank is unlikely to start hikes in interest rates for at least the next couple of meetings.
The US Fed in its two-day monetary policy meet that concluded on Wednesday, said it was on course to raise interest rates though not right away.
In the last three days, the rupee had fallen by 132 paise (or 2.12 per cent).
Meanwhile, the benchmark Bombay Stock Exchange (BSE) index Sensex spurted by 416.44 points (or 1.56 per cent).
Foreign portfolio investors (FPIs) sold shares worth US $253.36 million on Wednesday, as per data released by capital market regulator Securities and Exchange Board of India (Sebi).
Pramit Brahmbhatt, Veracity Group CEO, said, "Fed's positive statement helped improve the sentiment in the market. The benchmark six-month premium payable in May ended at 197.5-199.5 paise as against last close of 202-204 paise."
Forward contracts maturing in November 2015 settled at 402-404 paise as against 406-408 paise previously.
The Reserve Bank of India (RBI) fixed the reference rate for dollar at 63.31 and for euro at 78.10.
The rupee closed against the pound at 98.79 compared to its previous close of 100.02. Against euro, the rupee closed at 77.79.