Mumbai: Regaining its strength, the rupee appreciated by 55 paise Tuesday-- its biggest single-day gain in over seven months -- to close at 66.10 against the US dollar on heavy selling of greenback by exporters and banks.
A smart rebound in local equities and smooth supply of dollars on fresh capital inflows into equities and debts predominantly weighed on trading sentiments, forex dealers said.
The sentiment also turned buoyant after the government said it would consult with the opposition to conduct a special session of Parliament to pass the much-awaited GST Bill.
The domestic currency resumed higher at 66.44 as compared to overnight closing level of 66.65 at the Interbank Foreign Exchange (Forex) market on renewed dollar selling.
However, it fell back immediately, tracking highly volatile equity market and touched a fresh intra-day low of 66.76.
A recovery in stocks and fresh selling of dollars through state-run banks helped the local unit to stage a comeback to touch a high of 65.87 in late afternoon trade before ending at 66.10, showing a sharp rise of 55 paise, or 0.83 percent - its best single day gain since January 8.
The rupee had tumbled sharply by 82 paise to settle at 66.64 against the dollar yesterday amid global meltdown fears.
The dollar rose firmly against the other major currencies, recovering some ground from the overnight steep losses, although concerns over the impact of slowing growth in China on the global economy continued to weigh on investor confidence.
The US dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was sharply higher by 0.62 percent at 93.96.
Meanwhile, the benchmark BSE Sensex recovered by 290.82 points, or 1.13 percent, to settle at 26,032.38.
Foreign portfolio investors (FPIs) sold shares worth a net Rs 5,275.40 crore yesterday, as per provisional data released by the stock exchanges.
Veracity Group CEO Pramit Brahmbhatt said, "Taking cues from a spectacular rally in local equities, the rupee traded strong and tried to recover from yesterday's fall.
RBI was also seen supporting the rupee by selling dollars at the 66.70-levels which helped it appreciate over 55 paise to close at 66.10.
The trading range for the Spot USD/INR pair is expected to be within 65.60 to 66.60.
In the forward market, premium for dollar declined on the back of fresh receivings from exporters.
The benchmark six-month premium payable in January dropped to 189-191 paise from 191-193 paise.
Far-forward contracts maturing in July 2016 also fell to 412-414 paise as compared to 415-417 paise yesterday.
The RBI fixed the reference rate for the dollar at 66.7090 and for the euro at 77.1089.
The rupee recouped against the pound sterling to finish at 104.35 from Monday's close of 104.78 and regained against the euro to settle at 75.97 from 76.64.
It also rebounded against the Japanese currency to end at 55.06 per 100 yen as compared to 55.62 previously.
