Globally, sentiments were high after two major super economies the US and China expressed interest in settling their tariff war.
The rupee pared early gains but managed to end 4 paise higher at 69.68 against the US dollar on January 7 following dovish stance by the Federal Reserve and rising hopes of a thaw in ongoing US-China trade tiff.
Besides, smart gains in domestic equities and weakening of the greenback in overseas markets propped up the Indian currency.
This was the second straight session of gain for the domestic unit. It had risen by 48 paise to settle at 69.72 against the US dollar on January 4.
At the Interbank Foreign Exchange (forex) on January 7, the rupee opened on a firm note at 69.38. It gained further to hit a high of 69.23 following dollar selling by exporters, before finally closing at 69.68, up 4 paise.
Traders mainly attributed the rupee firmness to sustained selling of the American currency by exporters following the US Fed chief Jerome Powell's hints that the central bank will apply brakes on its tightening of monetary policy this year.
"Clearly, the Fed is at the tail end of a rate hiking regime and a move towards neutral policy will be welcome for financial markets in 2019. Positive sentiments reverberated across US and Asian markets," said Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management.
Globally, sentiments were high after two major super economies the US and China expressed interest in settling their tariff war. Envoys of both nations will have discussions during meetings on January 7 and 8.
Meanwhile, the dollar index dropped by 0.25 percent to 95.93 against a basket of six currencies in the late afternoon trade.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 69.4814 and for rupee/euro at 79.3890. The reference rate for rupee/British pound was fixed at 88.5943 and for rupee/100 Japanese yen at 64.21.
Meanwhile, brent crude, the global benchmark, was trading at 58.46 per barrel, up 2.45 percent."Brent prices shot up as working oil rigs in the US fell for the first time in three weeks signaling slowing production in the US. This likely led to bullish sentiments pulling back a bit in the late afternoon," Sharma added.