Mumbai: Stamping its best single-day show this year, the rupee on Wednesday surged by 37 paise to breach the the psychological 64-level against the US dollar and finally ended at a fresh two-year high of 63.70 after the RBI set the platform by lowering the repo rate by 0.25 per cent.
This is the best closing for the home currency since July 22, 2015, when it had ended at 63.58 against the US dollar.
The domestic currency on Wednesday rode on high optimism as the central bank after a 10-month pause decided to cut the benchmark interest rate by 25 basis points to 6 per cent, the lowest in over 6 years.
The apex bank had held its repo rate at 6.25 per cent since October 2016.
Though, the domestic unit resumed lower at 64.12 as compared to Tuesday's close of 64.07 at the Interbank Foreign Exchange market due to mild demand for the American currency.
Later, the rupee made a resounding recovery to touch a high of 63.59 following frantic dollar unwinding from speculative traders and foreign banks.
However, suspected RBI intervention towards the fag-end trade forced the rupee to shed some weight and end at 63.70, showing a handsome gain of 37 paise, or 0.58 per cent.
The rupee has appreciated by a whopping 422 paise, taking its gains over the year to date to 6.21 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.0690 and for the euro at 75.7488.
However, domestic financial markets felt that the RBI decision was on expected lines and showed little enthusiasm, resulting in fall in equities after climbing fresh highs.
Besides plunging dollar value, the rupee has a lot of positive factors supporting its outlook at this juncture and is likely to outperform in the region driven by government's economic policy initiatives and heavy capital inflows, a forex trader said.
Lowering the benchmark lending rate by the RBI could boost economic growth through higher demand and rejuvenate the sagging economy when the country coming to terms with the new Goods and Services Tax (GST) regime, he added.
The dollar has been hitting fresh lows against all major world currencies and losing fast its most preferred asset tag on a combination of underwhelming US economic data and political uncertainty amid subdued outlook for US rate hikes.
In cross-currency trades, the rupee recovered against the pound sterling to end at 84.24 from 84.61 per pound and also recouped against the euro to finish at 75.35 from 75.71 earlier.
The domestic unit also gained further ground against the Japanese yen to end at 57.52 per 100 yens from 58.02.
In worldwide trade, the dollar trimmed losses against the other major currencies on Wednesday, despite release of disappointing US non-farm employment data, while ongoing tensions in Washington continued to weigh.
The dollar index, which measures the greenback against a basket of currencies, was up marginally at 92.94 during Asia trade.
In forward market on Wednesday, premium for dollar declined due to fresh receivings from exporters.
The benchmark six-month premium payable in January moved down to 143-145 paise from 147-149 paise and the far forward July 2018 contract also fell sharply to 285-287 paise from 293-295 paise on Tuesday.
On the International commodity front, crude prices retreated sharply after its recent sharp rally on the back of rising US fuel inventories, dragging down US crude back below USD 50 per barrel.
The Brent crude, the international oil benchmark, was down 47 cents - almost 1 per cent - at USD 51.31 per barrel in early Asian trade.
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