The rupee ended at a fresh 18-1/2-month closing high on Wednesday, propelled by strong capital inflows and dollar sales spurred by prospects of earning a good weekend swap differential, traders said.
The local unit finished up 0.13 per cent at 47.5600/5650 per dollar, a level not seen since September 13, 2001.
"Supplies were boosted by a large FDI capital inflow and conversion of overseas equity proceeds by a large metal company, and sentiment was also helped by the good carry," said a dealer at a private-sector bank.
Traders stand to earn Rs 0.0225 per dollar that they sell on Wednesday in order to buy it back before the weekend.
Traders said only a bout of sustained dollar buying by some state-run banks towards close had checked the rupee's rise.
"The rupee was dealt at as high as 47.5475, before support came in for the dollar, first at 47.5550 and then 47.56 to check the rise," said a trader at a state-run bank.
State banks often buy on behalf of Reserve Bank of India, which tries to check volatility and protect India's export competitiveness.
Traders said concerns about a protracted Iraq war and its likely impact on oil prices receded into the background in the face of strong dollar remittances, which also helped lift volumes appreciably compared with the past two sessions.
Technical chartists also pointed to Tuesday's breach of a key support level at 47.65.
Rupee premiums on the forward dollar came sharply off highs to end steady to lower as traders bet that the rupee would rise further in coming days.
"Despite the tight call rates, forwards were received heavily because the market is betting on the spot rupee strengthening further," said a trader at another state bank.
The annualised premium on the benchmark six-month forward, shed five basis points from its session high to end flat at 3.48 per cent.
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