The rupee on Thursday finally managed to get back on its feet after a three-session losing spree, recovering from over six-month lows to end 22 paise higher at 65.50 a dollar despite buoyant greenback overseas.
Fresh bouts of dollar selling by exporters and banks along with light unwinding of long dollar positions largely helped the rupee to rebound from early plunge.
A slew of weak macro data along with massive fund outflows from domestic capital markets against the back drop of imminent Fed rate hike fear and unwinding of its stimulus measures predominantly kept forex sentiment highly nervous and disarray in last few days.
In the last three sessions, the rupee had depreciated by sharp 93 paise against the US dollar.
At the Interbank Foreign Exchange (forex) market, the rupee opened weak at 65.78 from Wednesday's close of 65.72 and soon drifted lower to hit 65.89 as dollar demand remained unabated.
However, showing some resilience, the local unit staged a smart recovery to touch a fresh intra-day high of 65.4950 in late afternoon deals before ending at 65.50, revealing a good gain of 22 paise, or 0.33 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 65.7604 and for the euro at 77.1764.
Meanwhile, Foreign portfolio investors (FPIs) sold off shares worth Rs 856.28 crore yesterday, showed provisional data from the stock exchanges.
Domestic bourses witnessed a temporary pullback rally in the final hour of trade following heavy buying activity in beaten-down index heavyweights even hectic short-covering in view of F&O expiry spurred the recovery momentum, snapping a seven-day selloff.
The flagship Sensex jumped almost 123 points to end at 31,282.48, while Nifty rose over 33 points to 9,768.95.
In the meantime, the dollar continued its spectacular surge for the fourth-straight day on the back of the US President Donald Trump's long-awaited tax reform proposal and also ahead to the second revision of US gross domestic product and labor market data.
The dollar index, which measures the greenback's value against a basket of six major currencies, was modestly down at 93.09 -- the highest level in one month.
In cross-currency trades, the rupee recouped against the pound sterling to finish at 87.85 from 88.18 per pound and firmed up further against the Japanese yen to end at 58.12 per 100 yens from 58.20 earlier.
It also gained further ground against the Euro to close at 77.13 from 77.17 yesterday.
In forward market today, premium for dollar fell back sharply due to fresh receving from exporters.
The benchmark six-month premium payable in February declined to 110-112 paise from 115.50-117.50 paise and the far forward August 2018 contract also dropped to 251-253 paise from 257-259 paise.
On the international energy front, crude prices rebounded a brief fall on renewed concerns over supply woes, spurred by rising tension around northern Iraq following the autonomous Kurdistan region's vote in favor of independence in a referendum.
Brent crude oil was up 60 cents at USD 58.50 a barrel in early Asian trade. U.S. light crude was 60 cents higher at USD 52.74 after reaching a five-month intra-day high of USD 52.86 a barrel.