The rupee gained a hefty 40 paise to close at 15-month high of 45.84/85 against the US currency on the back of heavy dollar selling by corporates.
Rallying for the third day in a row, the local currency broke the psychological 46-mark amid tepid activities in stock markets.
However, stocks have been rising for past four days indicating fund inflows which boosted the rupee sentiment.
According to forex dealers, heavy dollar sales by corporates and exporters mainly helped the rupee rally.
Reports of a possible yuan evaluation also weighed in favour of the domestic currency, they added.
In active trade at the Interbank Foreign Exchange market, the rupee opened higher at 46.16/17 a dollar and moved in a wide range before concluding the day at 45.84/85, a level not seen since September 23, 2008.
However, in New York, the dollar rose against euro and other rivals on Tuesday after a steep drop in US pending home sales fueled demand for the greenback as a safe-haven unit.
Meanwhile, global crude oil prices were trading over $81 a barrel in London on Wednesday.
The Indian benchmark Sensex ended higher by nearly 15 points on Wednesday, completing its four-session of gaining streak.
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