Mumbai: The rupee staged a smart rebound after a brief overnight wobble and ended higher by 12 paise at 66.70 against the American currency on fresh bouts of dollar selling amid upbeat sentiment post GDP data release.
Stronger-than-expected economic activity along with robust foreign portfolio investments into the equities and export proceeds predominantly supported the recovery momentum.
The country's economy grew 7 per cent in the October-December quarter, offsetting the note ban impact. The upbeat market sentiment was not derailed by intensifying speculations that the Federal Reserve will raise interest rates this month in the midst of greater confidence in the strength of the US economy.
Meanwhile, encouraging US macro data flows and a rally in stocks to record highs kept the dollar on demand during the Asian session.
The greenback strengthened against other top global currencies on growing expectations of Fed rate hike after the latest central bank official to signal that a hike may be in the offing, saying an improving global economy and a solid US recovery meant it would be "appropriate soon" to raise rates.
The US dollar index was trading sharply higher at 102.08 in late afternoon session.
At the Interbank Foreign Exchange (Forex) Market, the domestic currency opened higher at 66.76 from Wednesday's close of 66.82.
It largely moved in a tight range of 66.68 and 66.7850 before ending at 66.70, revealing a good gain of 12 paise, or 0.18 per cent.
The rupee had lost 13 paise on Wednesday. The RBI fixed the reference rate for the dollar at 66.7433 and for the euro at 70.3074.
In cross-currency trade, the rupee also strengthened against the British pound to close at 81.91 from 82.42 and hardened further against the euro to finish at 70.22 from 70.36 earlier.
It also rose against the Japanese Yen to conclude at 58.38 per 100 yens from 58.76 on Wednesday.
Meanwhile, domestic equities retreated sharply from multi-month highs on the back of fresh profit-taking across the board despite a spectacular rally in Asian markets and record closing in US markets where the Dow Jones for the first time ever moved above 21,000 level.
The benchmark Sensex dropped 144.70 points to end at 28,839.79, while broader Nifty slipped 46.05 points to finish at 8,899.75.
In the forward market, premium for dollar showed a mixed trend.
The benchmark six-month premium for August quoted almost flat at 161-163 paise from 161-163.50 paise, while the far-forward February 2018 contract edged higher to 318-320 paise from 316-319 paise on Wednesday.
On global commodity front, crude prices declined on Thursday largely impacted by a record build-up in US stockpiles.
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