The Indian rupee on Monday advanced by 25 paise to close at 69.89 against the US dollar in line with a strong rally in domestic equities, reflecting positive investor sentiments amid hopes that the incumbent NDA government will get the second term.
Besides, sustained foreign fund inflows also helped the rupee trade higher.
At the interbank foreign exchange, the Indian unit opened on a positive note at 69.99 against the dollar and hit a high of 69.8250 and low of 70.03. It finally settled the day at 69.89, showing 25 paise gains.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee against the dollar at 69.9308 and against euro at 78.5710. The reference rate for the rupee against the British pound was fixed at 90.7916 and against 100 Japanese yen at 62.93.
In the previous session on Friday, the rupee was down 14 paise to close at 70.14. On a weekly basis, however, the domestic currency clocked 78 paise gains.
Meanwhile, the US dollar index—a measure of the value of the American currency relative to a basket of key foreign currencies—was marginally higher at 97.3220.
Brent crude futures, the global oil benchmark, rose 0.68 per cent to USD 66.19 per barrel.
Forex traders attributed the rupee rise to growing support for the Modi government in the upcoming general elections. Prevailing geopolitical concerns in the wake of recent India-Pakistan military conflicts will be a key factor in the upcoming polls, they added.
Lok Sabha elections will begin on April 11 and will be held over seven phases followed by counting of votes on May 23, the Election Commission announced on Sunday.
Meanwhile, the BSE benchmark Sensex surged 383 points to close at 37,054.10 on Monday. Foreign institutional investors (FIIs) bought equities worth a net Rs 3,810.60 crore on Monday, while domestic institutional investors sold shares to the tune of Rs 1,955.55 crore, provisional data showed.
Analysts said that foreign funds poured money in domestic equity market by pricing in second term for Narendra Modi-led NDA government.
Bond markets are cautious ahead of inflation data which is likely to be higher from January reading of 2.05 per cent. An expectation of higher bond issuance for next year also put pressure on government bonds.