In tune with the surge in stock markets, the rupee rose sharply by 40 paise to end at 55.40 against the American currency amid fresh selling of dollars by banks and exporters.
After closing at 55.80 on Thursday, the rupee resumed higher at 55.68 at the Interbank Foreign Exchange Market.
As the session progressed, it firmed up further and closed at 55.40 per dollar. Intra-day, it moved in 55.39-55.78 range.
Forex dealers said fresh selling of dollars by banks and exporters in view of lower dollar in the overseas market and recovery in the equity market mainly boosted the rupee value.
The Sensex shot up by 272 points or 1.63 per cent to 16,949.83 -- a six-week high.
"Rupee appreciated due to rally in the equity market, which supported the currency a lot. Also, Euro to dollar at around 1.26 also strengthened the currency," N S Venkatesh, Head of Treasury, IDBI Bank.
There was also some kind of selling of dollars by the public sector banks during the end of the session, which helped the sentiments, said Hemal Doshi, Currency Strategist, Geojit Comtrade.
In London, the euro hovered below its three-week highs against the US dollar on Thursday as investors cut bearish bets on expectations that global central banks will step in to counter any adverse fallout from Sunday's election in Greece.
In Hong Kong too, the euro inched up a bit against the dollar.
Other major currencies in Asia also rose today.
The rupee also logged its second straight weekly gain after it closed at 55.42 on June 8.
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