The rupee on Thursday rose by 40 paise to touch a one-month high of 54.14 against the US dollar on hopes of strong fund flows, after BSP chief Mayawati decided to lend her party's support to government on FDI issue in the Rajya Sabha.
Forex dealers said firm local equities, signs of consistent capital inflows and sustained dollar selling by exporters also boosted the rupee sentiment.
The rupee swung between 54.04 and 54.58 during the day at the Interbank Foreign Exchange (Forex) market.
However, recovery in stocks after the news of support by Bahujan Samaj Party Chief Mayawati on foreign direct investment issue to the government helped the rupee to bounce back and end the day at at 54.14, a rise of 40 paise, or 0.73 per cent.
This is the highest level of rupee since November 2 when it had closed at 53.81.
"The only major factor that boosted rupee today was BSP's support to the government on allowing foreign direct investment in the multi-brand retail. Investors cheered the prospects of higher foreign capital inflows on this news," Dhanlaxmi Bank Executive Vice-President Srinivasa Raghavan said.
Foreign Institutional Investors infused $175.41 million in the stock markets on Wednesday, as per Sebi data.
The dollar index was down by a mere 0.008 per cent against a basket of six major currencies.
"The sharp appreciation in the rupee was seen after BSP's Chief Mayawati came in and said she will support the FDI in retail in Rajya Sabha.
"This further boosted the positive sentiments in the market and made the rupee gain against the US dollar. . .," said Abhishek Goenka, founder and CEO, India Forex Advisors.