Mumbai (PTI): The rupee today improved further by 2.50 paise to 40.07/08 against US currency in late morning trade due to sustained capital inflows amid weak dollar overseas.

In dull trade at the Interbank Foreign Exchange (Forex) market, the Indian unit opened lower at 40.12/13 a dollar but recovered smartly to quote at 40.07/08 at 10.30 am from yesterday's close of 40.0950/1050.

The dollar, which gained against its major currencies yesterday in New York, weakened against key rivals in Asian trade today on sustained worries over the widening damage to financial firms from the credit crisis.

Foreign Institutional Investors (FIIs) continued their buying spree and they pumped in over USD 700 million into equity markets in last five sessions since March 19, impacting positive on the rupee sentiment.

The Indian stock markets, after resuming firm, showed signs of stability as the benchmark sensex was quoting hardly changed in morning deals.

However, most of the Asian indices smartly recovered their early losses and were trading firm this morning.

Dealers attributed early fall in the rupee to some dollar buying by oil refiners on rising oil prices.

Meanwhile, light, sweet crude for May delivery rose USD 2 to USD 107.90 a barrel on the New York Mercantile Exchange after earlier rising as high as USD 108.14.