The rupee snapped its six-session losing streak to end 18 paise higher at 74.21 against the US dollar on Wednesday after the American currency weakened overseas.
At the Interbank Foreign Exchange (Forex), the domestic unit opened higher at 74.18 and advanced to 74.05 on fresh dollar selling by exporters amid weakness in the greenback against some currencies overseas.
However, the rupee erased some gains and finally settled for the day at 74.21 -- up by 18 paise, registering its first rise after sixth straight sessions of losses.
On Tuesday, the rupee tumbled 33 paise to finish at a fresh lifetime low of 74.39 against the US dollar.
Traders said a relief rally in domestic equity markets also boosted sentiment.
The BSE Sensex on Wednesday settled for the day at 34,760.89, higher by 461.42 points, or 1.35 per cent. The broader Nifty, too, reclaimed the key 10,400 mark. It finished at 10,460.10, showing a significant gain of 1.54 per cent.
Traders said RBI's decision to inject Rs 120 billion liquidity into the system through the purchase of government bonds on October 11 to meet the festival season demand for funds supported the recovery in rupee.
Sentiment also got a lift after the SBI, coming to the rescue of cash-strapped NBFCs, on Tuesday decided to buy their assets to the tune of Rs 450 billion, a move that will provide liquidity support to non-banking financing companies (NBFCs) facing headwinds after a series of loan defaults by IL&FS group firms.
Meanwhile, domestic institutional investors (DIIs) bought shares worth Rs 15.26 billion, while foreign institutional investors (FIIs) pulled out a net Rs 12.42 billion on Tuesday, as per provisional stock exchange data.
The FBIL set the reference rate for the dollar at 74.1316 per dollar. The reference rate for euro was fixed at 85.2637 and for the British pound at 97.6284. The reference rate for 100 Japanese yen was 65.60.
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