The rupee regained its dominance after a brief consolidation phase and ended at a fresh 16-month high of 65.36 against the American currency in the face of dollar unwinding from exporters and banks.
Weak greenback overseas alongwith abundant capital inflows supplemented further strength to the local currency.
Forex dealers pointed to the recent improvement in sentiment as the impetus for the renewed vigor. Massive capital inflows on hopes of more reform measures following BJP's strong showing in the recently held state elections spurred the rupee's biggest rally last week since early 2015.
Robust domestic macro fundamentals including 7 per cent GDP growth and a rebound in indistustrial production alongwith lesser-than-anticipated hawkish monetary policy stance too reflected in the srong rallying momentum.
The turnaround on the economic front has opened up a barrage of foreign capital fund flows into India. Foreign investors pumped in $3.4 billion in the capital markets so far this month, while country's foreign exchange reserves nudged up $98.6 million in the week ended March 10.