Dollar weakness was a major contributor to the rupee recovery as the skittish investors continued to lighten their long positions.
Breaking a four-day retreat, the rupee staged a modest recovery to end higher by 5 paise at 68.15 against the American currency in yet another day of extremely thin and lethargic trade.
The dollar weakness was a major contributor to the rupee recovery as the skittish investors continued to lighten their long positions.
A spectacular performance on domestic equities further supported the positive sentiment.
The domestic currency had depreciated by a whopping 25 paise in the previous four sessions.
Though, scattered dollar demand from importers in early trade was absorbed by the adequate local supplies, a forex dealer said.
The home unit opened on a firm footing at 68.08 as compared to Monday's close of 68.20 at the Interbank Foreign Exchange (Forex) market and advanced further to 68.07 on fresh bouts of dollar selling.
But, it relinquished strong early gains and remained largely locked within a narrow range throughout the day before ending at 68.15, showing a gain of 5 paise, or 0.07 per cent.
It briefly pulled back to hit an intra-day low of 68.23.
The US dollar index was trading higher at 100.29 in late afternoon session.
In worldwide trade, the US dollar steadied against major world currencies during Asian trading.
Meanwhile, British pound traded almost flat after hitting a high for 2017 ahead of UK Supreme Court decision on Brexit ruling, in which the question of parliamentary approval on triggering Article 50 will finally be decided.
The common European currency, Euro too remained bearish.
The RBI fixed the reference rate for the dollar at 68.1570 and for the euro at 73.2347.
In cross-currency trade, the British pound also gained some ground after overnight steep fall to settle at 84.81 from 84.91 per pound.
However, it softened against the euro to end at 73.17 as compared to 73.16 and also dropped further against the Japanese Yen to conclude at 60.13 per 100 yens from 59.99 earlier.
Meanwhile, domestic stocks surged to multi-month highs on the back of heavy buying in capital goods, banks, metal and energy shares along with short-covering ahead of F&O expiry amid stellar Q3 earnings outcome.
The benchmark Sensex shot up 258.24 points to close at 27,375.58, while broader Nifty jumped 84.30 points to 8,475.80.
In the forward market, premium for dollar showed a steady to firm trend in the absence of any market moving factors.
The benchmark six-month premium for June was quoted at 137-139 paise from 138.25-139 paise, while the far-forward December 2017 contract edged up to 280-282 paise from 279.50-280 paise.
Crude prices rose on Tuesday on expectations that the global market was tightening on lower production by OPEC.
