Snapping its five-day losing run, the rupee on Tuesday rebounded from 11-month lows to close with a hefty 32-paise gain at 56.44 against US dollar on heavy selling of the American currency by exporters amid signs of FII inflows.
The rupee derived strength from speculation that the government is likely to raise soon the cap on FII in G-secs by $5 billion, which will lead to more inflows.
The local currency had lost 119 paise in the past five sessions on rising worries over current account gap and fears that withdrawal of US stimulus will hit inflows from overseas.
At Interbank Foreign Exchange (Forex) market, rupee resumed higher at 56.56 a dollar from last close of 56.76 -- an 11-month low.
It later moved in a range of 56.39 and 56.73 on alternate bouts of demand and supply before ending at 56.44, rise of 32 paise or 0.56 per cent.
The rupee's recent weakness had prompted analysts to say the currency can revisit its all time low of 57.32 touched last June-end.
"Today, weakness in dollar index and strong gains in Euro also contributed to the gains in rupee.
"Rupee was supported by reports that India is likely to raise the cap on foreign institutional investment in government debt by USD 5billion soon", said Abhishek Goenka, Founder & CEO, India Forex Advisors.
The dollar index was just up by 0.03 per cent against a basket of six major global rivals.
Meanwhile, Chief Economic Adviser Raghuram Rajan told reporters in New Delhi that there is "lot of unused space" for FII investment in goverment securities (G-Secs).
The Indian benchmark Sensex today moved down further by 64.70 points, or 0.33 per cent, while FIIs bought shares worth Rs 85 crore as per provisional data with bourses.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Support for USD/INR (spot) pair is set on 56.28.
"The trading range for the same is expected to be within 56.25 to 56.75."
