Forex dealers said besides dollar weakening against the euro in overseas markets, higher opening in the equity market and increased foreign funds inflows mainly supported the rupee.
Banks and importers preferred to increase their dollar position at the current level, a forex dealer said.
Despite a heavy battering, the rupee on Tuesday made a smart recovery to close at 63.25 after hitting a fresh low of 64.13 against the US dollar, helped by RBI's massive intervention.
The US dollar bought 99.40 yen in Asian trade, compared with 99.21 in North American trade late on Monday.
The dollar was firm against some global currencies.
At the Interbank Foreign Exchange market, the domestic unit resumed lower at 54.42 a dollar from last weekend's close of 54.28 and declined further to a low of 54.52 on initial hesitancy in share markets and dollar demand from importers, mainly oil refiners, and some banks.
The rupee had lost 23 paise to end at 54.09 in Tuesday's trade due to month-end dollar demand.
This is the first time since June 27 that the domestic currency has fallen below the 60 level.
The rupee had rose by a staggering 80 paise, its biggest single-day gain in last nine months, to close at 59.39 amid signs of strong fund inflows on Friday.
Foreign institutional investors pumped in nearly $60 million (Rs 321.26 crore) into local equities, according to BSE provisional data.
Fresh dollar selling by exporters on hopes of fall in the USD after downward revision to that country's first quarter GDP growth also helped rupee recover as hopes surfaced that the Fed may delay the plan to taper of monetary stimulus.
Strength in the dollar against some other currencies overseas weighed on the rupee but a higher opening in the domestic equities cushioned the impact
Forex dealers said month-end dollar demand from oil importers and dollar's gain against other currencies overseas, also put pressure on the rupee.
Traders will watch out for any Reserve Bank of India intervention to prevent the rupee from weakening further.
Forex dealers said Euro's weakness against the dollar overseas also put pressure on the rupee.
A sluggish dollar movement in overseas markets and continued capital inflows restricted the rupee fall to a major extent, forex dealers said.
The rupee's upward movement was aided by a good dose of dollar selling by exporters and some banks, amid a weak dollar overseas, said forex dealers.
At the Interbank Foreign Exchange market, the local unit commenced strong at 54.40, which was also to be the day's high, as against previous close of 54.57.
At the Interbank Foreign Exchange market, the rupee resumed stable at its overnight closing level of 54.75 and immediately touched a low of 54.78.
Indian stocks and the rupee have benefitted from dollar liquidity induced by the US Fed stimulus.
While the rupee snapped a four-session downslide, it rupee could not cement intra-day gains as RBI kept short-term lending (repo) and cash reserve ratio unchanged, forex dealers said.
In International market, the US dollar fell further in early trade on Monday, losing further steam in the wake of Friday's weaker-than-expected economic-growth number and caution ahead of what is expected to be a busy week of data and monetary-policy decisions.
Month-end dollar demand from importers mainly affected the rupee value against the dollar, a forex dealer said.
The rupee commenced stable at its last closing level of 53.96 at the Interbank Foreign Exchange market.
Forex dealers said strength in euro against the US dollar overseas and increased capital inflows supported the rupee.
The rupee had gained 18 paise to 55.43 against the dollar in Monday's trade.
Forex dealers said a higher opening in the domestic equity market and strengthening of euro against the dollar overseas also supported the rupee.
Snapping a five-day downward march, the BSE benchmark Sensex on Wednesday shot up by 187.97 points to 18,414.45.
Persistent selling of the American currency by exporters and bank supported the rupee
The dollar index was up by 0.04 per cent against a basket of six major global rivals.
With Indian stocks under pressure, the rupee tumbled to a low of 54.89 on emergence of dollar demand from importers and some banks on expectations of further rise in dollar overseas.
Foreign institutional investors sold domestic shares worth USD 8.36 million (Rs 45.41 crore), according to provisional BSE data.
Forex dealers said continued capital inflows and a weak dollar overseas also supported the local currency.
Forex dealers say dollar rose against the euro after the European Union cut its economic growth forecast.
The dollar index was down by 0.03 per cent against a basket of six major rivals as Euro rose against the dollar after the Cyprus reached bailout agreement.
The local currency had lost 16 paise to close at 54.17 on Monday due to fresh dollar demand from importers and some banks.
The rupee on Wednesday gained 14 paise to 54.04 against the dollar in early trade at the Interbank Foreign Exchange on sustained selling of the US currency by exporters and banks.
Strengthening of the euro against the US dollar overseas also supported the rupee.
The rupee had gained 14 paise to close at 52.87 on Tuesday on fresh dollar selling by exporters on the back of sluggish movements of the US currency overseas.
The dollar index recovered its early losses and was trading up by 0.11 per cent against a basket of six major rivals.
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