Rupee climbs to 3-week high of 66.42 after historic Fed move

The rupee surged to a three-week high of 66.42 against the American currency after the Federal Reserve's historic episode of monetary tightening measures triggered panic dollar selling.

A spectacular rally in domestic equities further supported the sentiment.

World financials and currency markets too reacted vehemently to the landmark outcome, ending months of lingering confusion and uncertainty.

The US Federal Reserve announced a quarter-point increase in the target range for the federal funds rate to 0.25-0.5%.

This marks the end to the seven-year regime of near-zero interest rates and the Federal Reserve's first interest rate hike in nearly a decade aftermath of global financial meltdown in 2008 - the worst economic disaster following Lehman's bankruptcy.

The domestic unit opened firmly higher at 66.62 from Wednesday's close of 66.73 at the Interbank Foreign Exchange Market against the backdrop of overnight developments and continued its strong upmove till the final trade to end with a solid gain of 31 paise, or 0.46% at 66.42 - the level not seen since November 24.

It briefly touched an intra-day low of 66.6750.

Frantic dollar selling by banks and corporates alongside unwinded long dollar positions by speculators helped the rupee to rally.

Robust stockpile of forex reserves and improving macro-economic environment alongside policy reforms by the Narendra Modi government and measures taken by governor Raghuram Rajan largely helped the Indian currency to withstand the volatility and pressure, a forex dealer said.

"The re-rating of India story and growing confidence in growth outlook, which stands the best with a 7.4% growth, also bolstered sentiment, he added.

Incredibly long string of reasons including concerns over the strength of the global economy, worries about slowdown in the world's second-largest economy China and capital flight from emerging markets had prompted Fed to hold rates steady in recent past, despite bullish macro cues.

On the global front, the dollar traded two-week highs against a basket of its major peers.