The strengthening rupee ended at yet another 20-month high on Tuesday as exporters dumped the US unit in view of its continued weakness overseas.
The rupee closed at 47.1575/1650 per dollar, gaining from Monday's 47.1700/1750 and coming off an early low of 47.18.
"Exporters expect the rupee to rise to 46.80 by the end of the year as the dollar's global weakness has left the rupee undervalued by around two percent in trade-weighted terms," said Rohan Lasrado, assistant vice president at private-sector HDFC Bank.
Importers sat tight as the dollar, with the help of Japanese intervention fought a global sell-off, which was sparked by comments from US Treasury Secretary John Snow suggesting that the United States was not unhappy with a weak currency.
In an interview with Reuters, Snow said Japan and Europe should not blame a weaker dollar for their economic woes.
Traders said the rupee may hold at 47.15 because of central bank action, but eventually breach this level and rise to 47.10.
Premiums on the forward dollar fell on banks' buy-sell cash-spot swaps to tackle a cash dollar crunch caused by unexpected demand from companies and as banks looked to stay covered in anticipation of a further shortfall on Wednesday.
The cash-spot premium eased to 1.74 per cent from Monday's 3.09, dragging down premiums across maturities, though more sharply in near maturities.