The rupee appreciated for the second day today to end at one-week high of 66.73 against the US dollar even as the Federal Reserve's decision on an interest rate hike is highly anticipated.
Besides, heavy unwinding of dollars by banks and corporates along with upbeat equities predominantly supported the rupee upmove.
The local currency resumed almost flat at 66.91 at the Interbank Foreign Exchange (Forex) market, from its overnight close of 66.92.
After trading in a narrow range with positive bias in early part of the trade, the domestic unit regained strength to hit a high of 66.70 following sustained dollar selling by exporters before ending at 66.73, showing a smart gain of 19 paise, or 28 per cent.
The rupee has gained 36 paise after recovering from over two-year low touched on December 14.
In global trade, the dollar traded marginally higher against other major currencies ahead of the most anticipated macro event for many years.
After keeping the benchmark rates at a record low of 0.25 per cent for almost a decade, the US Federal Open Market Committee (FOMC) is expected to announce its decision on monetary policy later in the day when its two-day meeting concludes.
Although a Fed rate hike is highly anticipated, it could trigger sharp volatility across the currency spectrum, especially against the emerging markets currencies, but it remains difficult to say how exactly the market will react to the event, a forex dealer said.
RBI Governor Raghuram Rajan had said last week that the central bank would intervene in the Exchange Traded Currency Derivatives (ETCD) market, if required to curb nervousness and volatility.The dollar index, which tracks the world's reserve currency against a basket of its peers, was up 0.11 per cent at 98.32.
Maintaining its strong rallying momentum, the benchmark BSE Sensex jumped over 214 points to end at 25,533.76, while broader Nifty rose by 61 points to finish at 7,761.80.
