The rupee today staged a stellar comeback to end at a fresh one-week high of 65.01 against the US dollar with investors taking a bullish stance on the economy even as the RBI kept key rates unchanged.
Stamping its second biggest one-day rally for the year - the home currency garnered a solid 49 paise, or 0.75 per cent.
Frantic unwinding of the American currency by banks and corporates along with upbeat equities predominantly weighed on the rupee trade amid broad based dollar selling in Asia.
The rupee was under severe pressure last week and touched a 6-1/2 month low 65.89 during intra-day.
Forex market sentiment got a boost after core sector growth rebounded to a five-month high 4.9 per cent in August also supported by robust manufacturing PMI data.
Meanwhile, the RBI kept interest rate unchanged in view of upward trend in inflation.
The apex bank also lowered growth forecast to 6.7 per cent for the current fiscal from its August forecast of 7.3 per cent in view of issues with GST implementation and lower kharif output estimates.
Stock markets ended higher with the benchmark Sensex surging over 174 points to close at 31,671.71, while Nifty rose 55 points at 9,914.90.
The rupee opened on a strong note at 65.37 as compared to Tuesday's close of 65.50 at the Interbank Foreign Exchange (Forex) market and maintained its buoyant momentum throughout the day amid easing dollar pressure.
It climbed to hit a new intra-day high of 64.95 in late afternoon deals before ending at 65.01, revealing a smart rise of 49 paise, or 0.75 per cent.
The domestic currency yesterday ended lower by 22 paise.
The RBI, meanwhile, fixed the reference rate for the dollar at 65.2899 and for the euro at 76.8266.
On the global front, the dollar index, which measures the greenback's value against a basket of six major currencies, was lower at 93.23.
In cross-currency trades, the rupee maintained its bullish uptrend against the Pound sterling to finish higher at 86.33 from 86.81 per pound and strengthened against the Japanese yen to settle at 57.84 per 100 yens from 57.96.
The home currency also firmed up against the Euro to close at 76.54 from 76.99 yesterday.
Forward market rates could not be received from sources today.
On the International energy front, Brent crude futures were down 47 cents at USD 55.53 a barrel. US West Texas Intermediate crude futures fell 32 cents to USD 50.10 per barrel in early Asian trade.