The rupee continued its strong recovery momentum for the second day, surging by 27 paise to end at 68.38 against the US currency today even as a powerful dollar rally remained unabated globally.
The rupee had closed at fresh 2016 low of 68.76 last Friday.
Moreover, easing FCNR redemption stress of the USD 25 billion foreign currency non-resident (FCNR) deposits, which were raised in September 2013 to bolster the rupee, alongside suspected RBI intervention through state-owned banks largely aided the local unit to stay afloat, a forex dealer said.
At the Interbank Foreign Exchange (forex) market, the domestic currency opened a tad weak at 68.67 from Tuesday's close of 68.65 in a nervous trade.
However, selling of dollars by banks and some exporters helped the local unit to reverse its early subdued trend and clock a sharp recovery to conclude at 68.38, a steep rise of 27 paise, or 0.39 per cent.
It touched a high of 68.3625 briefly during the intra-day trade.
In worldwide trade, the US dollar continued its highly bullish trend against all major emerging market currencies on the back of overnight better-than-expected third quarter US GDP data amid hardening probability of a rate hike from the Fed at the upcoming FOMC meeting in mid-December.
The US dollar index was quoted higher at 101.22 in late afternoon.
Meanwhile, RBI today fixed the reference rate for the dollar at 68.5260 and euro at 72.8431.
In cross-currency trades, the rupee recovered smartly against the pound sterling to finish at 85.06 from 85.59 and also firmed up further against the Japanese yen to close at 60.48 from 60.96 per 100 yens earlier.
But, it dropped against the euro to close at 72.89 as compared to 72.76 yesterday.
In the forward market, premium for dollar rose due to fresh paying pressure from corporates.
The benchmark six-month premium for April moved up to 109-111 paise from 101.5-104 paise and the far-forward October 2017 contract also firmed higher to 257-259 paise from 248-251 paise yesterday.
Meanwhile, staging a spectacular comeback on wave of frantic buying mainly in beaten down stocks, the BSE Sensex rose by 258.80 points to end at 26,652.81, while broader Nifty rose 82.35 points to 8,224.50.
In global trade, crude prices rallied more than 5 per cent today on reports that members of oil producing countries cartel OPEC were close to an agreement on cutting output.
The RBI fixed the reference rate for the dollar at
67.9547 and for the euro at 71.6175.
In cross-currency trades, the rupee inched up to 83.48 against the pound sterling from 83.49 yesterday while fell against the euro to settle at 71.64 from 71.21 per euro.
It recovered against the Japanese Yen to 58.10 per 100 yens from 58.43 previously.
In forward market today, premium for dollar firmed up on paying pressure from corporates.
The benchmark six-month premium payable in May moved up to 123.5-125 paise from 122-123 paise yesterday and far forward November 2016 contract also looked up to 268-270 paise from 266.25-267.25 paise.
Meanwhile, the Indian benchmark Sensex rose further by 266.31 points or 0.99 per cent to 26,626.46.