Indian rupee rose by 61 paise to the strongest level in more than five weeks after the Federal Reserve cut its benchmark interest rate to a record low, boosting demand for higher-yielding assets.

The currency gained for a third day as Asian stocks gained, stoking optimism falling interest rates in the world's largest economy will damp risk aversion among investors.

Average daily purchases of Indian shares this month by overseas investors exceeded sales for the first time since April, data from SEBI showed.

 At the Interbank Foreign Exchange (Forex) market, the Rupee traded at 47.30 against the Dollar, a rise of 61 paise over the previous close of 47.91/92.

Forex dealers said that the rupee gained on dollar selling by banks and exporters after an upward trend in Asian equity markets raised hopes for strong opening on domestic bourses.

Asian markets today opened higher with Hong Kong's Hang Seng going up 2.7 per cent, while Japan's Nikkei 225 was up nearly one per cent in early trade.

Analyst expects rupee to gain further before finding support. Aloke Nandi, Managing Director, Ascent Forex Consultants says that the dollar will be under intense pressure, the rupee would probably appreciate to around 46-46.5 per dollar.

Stock market losses shed rupee gains
The rupee retreated from one-month highs on Wednesday as local shares fell, but still ended stronger after the US Federal Reserve lifted sentiment by slashing interest rates.

The rupee closed at 47.67/69 per dollar, 0.5 per cent higher than its previous close of 47.92/93. It rose to as much as 47.22 during trade, its highest since 10 November 2008.

Foreign institutional investors have been net buyers of about $440 million worth of Indian shares so far in December, but have dumped a net $13.2 billion in 2008. They were net buyers of $17.4 billion last year.

International influences
The dollar dipped towards 13-year lows against the yen and a near 3-month low versus the euro on Wednesday after the U.S. Federal Reserve slashed interest rates.

With the Federal rates cut, pressure is mounting for Japan and China to follow suit.

Goldman Sachs predicts that the Bank of Japan's policy board, which wraps up a two-day meeting Friday, will cut its overnight call rate target from the current 0.30 per cent to 0.15 per cent.

JP Morgan predicts the BOJ will go further to 0.10 per cent.