MUMBAI: The rupee has hit nearly two-and-a-half year high against the greenback as the global dollar weakness is helping the emerging market currencies to gain at the beginning of the new year.
The local unit Tuesday closed at 63.48 a dollar, up 0.31% from its previous day closing.
"As long as emerging market growth outlook remains robust, the money is going to chase them like in India," said Anindya Banerjee, currency analyst at Kotak Securities. "The rupee may extend its rising trend, although the pace would slower than other emerging markets."
Last calendar year, the rupee gained about 5.5%.
While importers were seen buying dollars taking advantage of a cheap dollar, some exporters, which did not cover their positions earlier, booked futures contract to protect their receivables, dealers said.
Foreign portfolio investors bought domestic equities worth Rs 523 crore, show provisional data from BSE.
The Dollar Index , which measures the unit against six major currencies, slipped below the 92 mark on Tuesday.
Back home, the rupee strengthened more than 1% against the dollar mirroring gains in other emerging markets.
But, the pace of rupee is unlikely to be sharp as investors are still way of the government's fiscal conditions, dealers said.
Also, the Reserve Bank of India is expected to intervene in the currency market, a move aimed at curbing any wild swings.