Re at 4-mth high, gains 93 paise to ends above 53-mark vs USD

Heavy dollar selling by exporters and some banks on the back of weakness in dollar overseas also boosted the rupee sentiment, forex dealers said.

At the Interbank Foreign Exchange (Forex) market, the rupee opened higher at 54.15 a dollar from previous close of 54.38 and immediately touched a low of 54.20.

Helped by FII inflows worth Rs 2,327.82 crore (about USD 430 million), the rupee later rallied to a high of 53.33 before settling at a four-month high of 53.45 -- up 93 paise, or 1.71 per cent over yesterday's close.

The unit also recorded its third successive week of gains.

Today's gain is one of the biggest gains logged by the currency in this year. On September 14, rupee vaulted 113 paise or 2.03 per cent to close at 54.30.

The buying in favour of rupee also received a boost after Finance Minister P Chidambaram today cut withholding tax on overseas borrowings to 5 per cent from 20 per cent, a move expected to bridge current-account shortfall that previously fuelled the slide in rupee.

"The statement of Samajwadi Party to continue support to UPA-II along with steps regarding withholding tax in case of borrowing through ECB route supported the sentiment," said Hemal Doshi, Currency Strategist, Geojit Comtrade.

The dollar index was down by 0.28 per cent against a basket of six major global rivals. This happened after reports said Spain and European officials were working together on a plan for economic reforms.

"Rupee movement was mainly due to buoyed movement in equity market along with sound inflows from FIIs...Though there was some kind of demand for dollars from oil importers, that has been met without impacting the rupee movement," N S Venkatesh, treasury head, IDBI Bank said. (MORE)