The rupee recovered against the pound sterling to end at 104.72 from 105.16 previously and rebounded to 88.42 per euro from 89.04.
It gained against the Japanese yen to 67.44 per 100 yen from the previous close of 68.03.
Indian rupee in sharp rebound on suspected heavy intervention
(Reuters) - The Indian rupee staged a sharp recovery on Wednesday after suspected heavy dollar selling by the central bank, preventing the battered currency from slipping to a record low on the same day that the authority ushers in a new governor.
Raghuram Rajan, a former chief economist at the International Monetary Fund (IMF), takes charge at the Reserve Bank of India as the country faces its worst economic crunch since a balance of payments crisis two decades ago.
In a reminder of the uphill task he faces, a report on Wednesday showed that activity in India's services sector shrank in August for the second straight month for its lowest reading in four years.
It added to a series of data showing the economy struggling for growth. GDP figures last week said annual growth had slipped to 4.4 percent in the April-June quarter, its weakest pace in four years. The mining and manufacturing sectors contracted from a year earlier.
The country is grappling with a record current account deficit and a hefty budget deficit, factors both weighing on the rupee. Concerns about rising prices for oil and gold, India's two biggest import items, are keeping pressure on the currency.
At 0754 GMT, the rupee was changing hands at 67.23/25, up 0.6 percent from Tuesday's domestic close.
Dealers cited heavy central bank intervention via state-run banks, which coupled with dollar selling by foreign banks related to arbitrage opportunities with the offshore rupee market, pulled the rupee sharply back from its day's low of 68.62 per dollar.
The currency hit a record low of 68.85 last week, marking a drop of 20 percent from the end of 2012.
"The intervention has been aggressive and the best part is it has been consistent today. Even dollar/rupee levels in the offshore and currency futures markets have sharply come down," said Anil Kumar Bhansali, vice president at Mecklai Financial.
Rajan, who famously predicted the 2008 global financial crisis, officially becomes the 23rd governor of the RBI after signing an oath of secrecy on Wednesday. But he will not take charge operationally until Thursday.
Aware markets are scrutinising everything he says for clues about his intentions, Rajan