The rupee today recovered from all-time closing low, adding 42 paise to end at 60.88 against the dollar amid expectations the government would announce fresh steps to support the local currency.
A rebound in local equities, a weak dollar overseas and fresh dollar sales by exporters also aided the rupee.
The local currency opened higher at 61.20 a dollar from the previous close of 61.30 at the Interbank Foreign Exchange Market. It declined to 61.40 and bounced back to 60.82 before settling at 60.88, a rise of 42 paise or 0.69 per cent.
Yesterday, the rupee had tumbled 53 paise or 0.87 per cent.
Economic Affairs Secretary Arvind Mayaram hinted the government may come out with more steps to support the rupee.
"I think you should wait till the end of the week...the Finance Minister will be talking about this later," he said after the Reserve Bank of India's board meeting in Mumbai.
The rupee's recovery helped the benchmark S&P BSE Sensex to close 124.46 points higher today. The local currency had plunged to an all-time intra-day low of 61.80 on Tuesday.
"Any positive and encouraging steps by the finance ministry and the RBI will help the rupee to erase its losses and post gains against the US dollar," said Abhishek Goenka, founder & CEO of India Forex Advisors.
The dollar index, consisting of six major global units, was down by 0.15 per cent.
"Immediate support for USD-INR (spot) pair is at 60.68 and the trading range is expected to be within 60.65 to 61.35," said Pramit Brahmbhatt, CEO of Alpari Financial Services. "The rupee is still looking weak as the government has not taken any firm steps to reduce the current account deficit, the main reason for the currency depreciation."
Forward dollar premiums ended sharply lower on fresh receipts by exporters.
The benchmark six-month forward dollar premium payable in January dropped to 250-1/2-253 paise from the overnight close of 261-264 paise and far-forward contracts maturing in July dipped to 469-472 paise from 488-492 paise.
The RBI fixed the reference rate for the dollar at 61.1150 and for the euro at 81.5420.
The rupee recovered to 94.39 against the pound sterling from the previous close of 94.62 and rebounded to 81.34 against the euro from 81.52.
It remained weak against the Japanese yen at 63.21 per 100 yen from 63.03.
The forex and money markets are closed tomorrow for Id-ul Fitr.