The rupee today made a smart rebound, gaining a good 15 paise to end at 66.73 on fresh bout of dollar selling by exporters and banks amid weak overseas sentiment.
A smart rally in local equities and light unwinding of long dollar positions by foreign banks mainly helped the rupee regain strength.
Weakness in the dollar against other currencies overseas on unexpected fall in US manufacturing index also made the rupee stronger, a forex dealer said.
Drawing comfort from buoyant global markets, domestic equities staged a solid rebound from their multi-month lows on value buying.
The home currency resumed on a firm footing at 66.80 from Monday's close of 66.88 at the Interbank Foreign Exchange (Forex) market and moved in a narrow range with positive bias throughout the day before ending at 66.73, showing a smart gain of 15 paise, or 0.22 per cent.
It had ended lower by 17 paise at 66.88 yesterday.
In worldwide trade, The greenback turned bit soft and kept retreating against its major trading partners during the past Asian session after key US macro data fell short of estimates overnight and some caution ahead of US inflation data later in the day.
Better-than-expected numbers will likely fuel hopes of a December hike.
Pound Sterling fell back after a marked rebound in UK inflation for both the headline and Consumer Price Index (CPI) dampen bets for an imminent BoE rate cut.
The dollar index, which measures its broader strength against a basket of currencies, was marginally down at 97.79.
The RBI today fixed the reference rate for the dollar at 66.7268 and euro at 73.5463.
In cross-currency trades, the rupee retreated against the pound sterling to finish at 81.90 from 81.29.
However, it recouped against the euro and finished at 73.40 as compared to 73.53 and also rebounded against the Japanese yen to settle at 64.19 from 64.23 per 100 yens earlier.
In the forward market, premium for dollar dropped due
to fresh receivings from exporters.
The benchmark six-month premium for April drifted to 131-133 paise from 140.5-142 paise and the far-forward October 2017 contract also fell sharply to 289.5-291.5 paise from 303.75-304.75 paise on Thursday.
The rupee tumbled by 88 paise or 1.30 per cent this week due to huge foreign funds outflows of over 18,840 crore from stocks and debt markets. The rupee had closed at 67.25 on Friday last.
Crude prices retreated sharply from initially rising to a fresh two-month high in a highly volatile day on the back of a strengthening greenback amid fading expectations of production cuts from OPEC members.
The BSE Sensex stumbled for the fifth day as it touched a fresh six-month low due to continuous foreign outflows after Fed chair Janet Yellen signalled a rate hike in December policy review.
The Sensex dropped by 77.38 points, or 0.30 per cent, to 26,150.24, its lowest level since May 25, 2016.