The rupee strengthened to its highest level in more than two weeks on Monday, boosted by gains in local shares and other Asian peers following better-than-expected US jobs data on Friday.

At 10:20 a.m. (0450 GMT), the partially convertible rupee was at 46.51/52 per dollar, after hitting 46.4950, its strongest since Aug. 19, and 0.3 percent above its close of 46.63/64 on Friday. The index of the dollar against six major currencies was down 0.2 percent and most Asian currencies were stronger against the dollar.

"Good data is showing its effects. If 46.50 breaks significantly then we may head to 46, which is the next support for the dollar," said Ashtosh Raina, head of forex trading at HDFC Bank. The US Labor Department said overall employment fell for a third straight month in August, but the drop was far less than the market expected. And the private sector, considered a better gauge of labor market health, added 67,000 jobs, exceeding forecasts.

The dollar was on the defensive on Monday after the payrolls data eased market anxiety over chances of a double-dip recession in the United States and boosted demand for the euro and growth-leveraged currencies.

"Today there is a New York holiday and hence there are no cash outflows, plus stocks and euro are also higher. I expect the rupee to hold in a 46.45-46.60 range today," a senior dealer with a private bank said.

Indian shares were trading 0.9 percent higher, with Infosys Technologies and ICICI Bank leading the rise, taking cues from strong Asian markets. Foreign funds have bought shares worth a net $13 billion so far in 2010, adding to last year's record $17.5 billion inflows.

Dariusz Kowalczyk, a strategist at Credit Agricole, wrote in a report that optimism on revenues among service exporters suggests the rupee could strengthen to 46 by the end of 2010 and to 44 by late 2011. One-month offshore non-deliverable forward contracts were quoted at 46.69, weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 46.65, with the total traded volume on the two exchanges at about $700 million.