The rupee strengthened further by 18 paise to close at 66.49 against the US currency due to persistent selling of dollar by banks and exporters after RBI kept its key policy rates unchanged.
RBI adopted an accommodative stance while leaving rates unchanged at its fifth bi-monthly policy review today.
"Firm trend in equity market also supported the rupee sentiment," a forex dealer said. India's economic growth accelerated to 7.4 per cent in the July-September quarter from growth rate of 7 per cent in the previous quarter ended June 30.
The local currency opened higher at 66.52 per dollar as against the yesterday's closing level of 66.67 at the Interbank Foreign Exchange (Forex) market.
The rupee firmed up further to 66.4350 before ending at 66.49 per dollar, showing a gain of 18 paise or 0.27 per cent. It moved in a range of 66.4350 per dollar and 66.60 per dollar during the day.
The dollar index was lower by 0.20 per cent against a basket of six currencies in the late afternoon trade.
"Rupee has remained range bound with positive bias. Interest rate decision and dovish view of RBI Governor has given support to equity market," Veracity Group CEO Pramit Brahmbhatt said.
The rupee is expected to appreciate and the trading range of the same is expected to be 66.20 to 66.80, he added.
Meanwhile, the benchmark BSE Sensex ended higher by 23.74 points or 0.09 per cent.
Forex dealers said besides increased selling of the American currency by exporters and banks, weakness in the dollar against other currencies supported the rupee.
Further, a higher opening in the domestic equity market influenced uptrend in the rupee, they added.
On Monday, rupee had ended 9 paise higher at 66.67 against the US dollar on fag-end selling of the American currency by banks and exporters.
