The rupee opened 26 paise higher at 71.45 against the US dollar on Wednesday. The domestic currency on Tuesday furthered its loss by another 28 paise to close at a new six-month low of 71.71 as economic uncertainties continued to weigh.
Investors remained risk averse considering a host of factors including fast-spreading economic slowdown, outlook on foreign fund outflows and weakness in most emerging market currencies, according to forex traders.
However, there are expectations that the government will soon come out with stimulus measures to arrest slowdown in consumer demand in various sectors.
"Indian rupee declines for a second day as importers and foreign banks rush for the dollar amid recovery in crude oil prices. Market is also expecting fund outflows of around $102 million on the back of Shell selling stake in Mahanagar gas," VK Sharma, Head PCG & Capital Markets Strategy, HDFC Securities said on Tuesday.
In the equities market, the S&P BSE Sensex settled 74.48 points, or 0.20 per cent, lower at 37,328.01, while the NSE Nifty ended 36.90 points, or 0.33 per cent, down at 11,017. Foreign institutional investors (FIIs) bought equities worth Rs 373.23 crore on Tuesday, according to provisional exchange data.
"Today, USD/INR pair is expected to quote in the range of 71.20 and 71.80," said Gaurang Somaiya, Research Analyst (Currency) at Motilal Oswal Financial Services (MOFSL).
On the global front, Asian shares were trading flat in the morning trade on Wednesday as worries about global recession and endless trade wars vied with hopes for a lot more monetary and fiscal stimulus to keep growth going. In commodities markets, US crude firmed 17 cents to $56.26 per barrel while Brent added 23 cents to $60.26, Reuters reported.
In the currency market, the dollar marginally higher against the yen at 106.48 after losing 0.4 per cent on Tuesday, while sterling was last trading at $1.2170. The dollar index was on the defensive at 98.178 as it drifted away from a three-week top touched on Monday, said a Reuters report.