The currency was trading at 53.80 to the dollar, up 49 paise over Friday's close. The sharp gains in the rupee was on hopes that the reforms process, particularly FDI in multi-brand retail and aviation would bring fresh dollars into the country.

The government on Friday unleashed a wave of reforms, a day after hiking the prices of diesel and capping the limit of LPG cylinders.

Foreign funds flows into the stock markets has also been robust with foreign funds net buying stocks worth more than Rs 2000 crores on Friday, as per data from the National Stock Exchange.

These flows would continue to provide strength to the rupee.

Meanwhile, markets continued to trade higher for the eights day in a row. The Sensex was up more than 120 points in early trade.

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