Snapping its 2-day losing streak, the rupee recovered by 26 paise to close at 66.22 against the US dollar on Tuesday on fresh selling of the greenback by banks and exporters in overseas markets amidst fall in equities.
The rupee opened higher at 66.38 against yesterday's closing level of 66.48 at the Interbank Foreign Exchange (Forex) market and hovered in a range of 66.18 and 66.46 before concluding at 66.22, showing a gain of 26 paise or 0.39 per cent.
The domestic currency has already dropped 44 paise, or 0.67 per cent, in the previous two sessions.
The US dollar index, which tracks the greenback against a basket of six major rivals, was down by 0.40 per cent.
In the Tokyo market, the dollar slumped against the yen today, as a fresh bout of weakness in global stock markets following weak Chinese data sent investors scurrying to the perceived safety of the Japanese currency.
"Investors are still keeping their eyes on the stock market," said Kyosuke Suzuki, the head of the foreign-exchange and money-market sales department at Societe Generale in Tokyo.
Meanwhile, the benchmark BSE Sensex dropped 586.65 points, or 2.23 per cent, to settle at 25,696.44 today.
Veracity Group CEO Pramit Brahmbhatt said, "The Reserve Bank was seen supporting the rupee by selling dollars during the day which helped the local currency to appreciate".
The dollar index was also trading weak against other major currencies which helped the rupee to trade positively for the day, he added.
The trading range for the Spot USD/INR pair is expected to be within 65.80 to 66.60. In forward market today, premium for dollar moved down further on persistent receivings from exporters.
The benchmark six-month premium payable in February softened to 212.5-214.5 paise from 213.5-215.5 paise yesterday and far forward August 2016 contracts eased to 429.5-431.5 paise from 430.5-432.5 paise previously.
The RBI fixed the reference rate for the dollar at 66.2603 and for the euro at 74.7880.
The rupee recovered against the pound sterling to close at 101.66 from yesterday's closing level of 102.51 but moved down against the euro to 74.58 from 74.54.
It fell further against the Japanese currency to finish at 55.18 per 100 yen from 54.79 yesterday.
