Mumbai: The rupee surged to its highest level in nearly four months in intra-day trade and fell back to close with a 28 paise gain at 61.13 against the dollar Monday, boosted by stocks that climbed to a record after BJP won three out of four state assembly elections.
Support for the rupee also came as foreign investors continued to buy local stocks and exporters sold dollars.
At the interbank foreign exchange market, the rupee commenced sharply higher at 60.90 a dollar from the previous close of 61.41 and immediately touched 60.84, a four-month high, on the back of a strong rally in local stocks.
The gains were trimmed and the local currency dropped to the day's low of 61.21 on dollar demand from importers before closing at 61.13, a two-month high. Previously, the rupee had touched an intra-day high of 60.45 on August 12, and it had closed at 61.07 on October 11.
"The recent gains in the currency are mainly attributed to the assembly elections. BJP, which is widely seen by investors as being more business friendly, swept recent state elections. Dollar weakness also continued to contribute to the gains in the rupee," said Abhishek Goenka, CEO of India Forex Advisors.
The benchmark 30-share S&P BSE Sensex rose for the third straight session, adding 329.89 points, or 1.57 percent, to a record closing of 21,326.42. Overseas investors bought shares worth Rs 863.77 crore on Friday, according to provisional data with the stock exchanges.
The dollar index, consisting of six major global rivals, was down by 0.03 percent.
"The Sensex and the Nifty rose to a record high today as main opposition party BJP won in three out of four key state elections," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India). "Investors welcomed the party open heartedly as it is widely seen as more stable and business friendly under the leadership of Narendra Modi."
Forward dollar premiums improved further on sustained payments from banks and corporates.
The benchmark six-month forward dollar premium payable in May edged up to 249-251 paise from 248-250 paise previously and far-forward contracts maturing in November inched up to 486-488 paise from 485-487 paise.
The RBI fixed the reference rate for the dollar at 61.1785 and for the euro at 83.8195.
The rupee remained strong against the pound at 100.15 from 100.47 on Friday and shot up to 59.29 per 100 Japanese yen as against 60.16. It recovered to 83.85 per euro from 83.98.