The rupee on Wednesday rebounded by 61 paise, notching up its best single-day gain since March 2017 to close at 72.37 against the US currency supported by heavy dollar selling by banks and weakness in the greenback in global markets.
Snapping its two-day decline, the rupee opened higher at 72.71 against its record closing low of 72.98 Tuesday and touched a session high of 72.34 in day trade as crude oil prices eased globally.
The rupee closed at 72.37, up by 61 paise or 0.84 per cent—its best single-day gain since March 14, 2017.
Heavy dollar selling by exporters along with state-run banks likely on the behalf of the RBI, too boosted the rupee sentiment, restricting the local unit from breaching the 73 level.
The rupee had collapsed to a historic intra-day trading low of 72.99 on Tuesday before closing at a lifetime low of 72.98.
Forex market witnessed a sudden revival in sentiment towards the mid-session aided by soft global crude prices.
Global markets were also upbeat after lighter than feared retaliatory tariffs by China on the US goods, raising hopes that the two major economies are likely to avoid a trade war.
China announced a lighter 5-10 per cent tariffs on USD 60 billion of US products which analysts termed as not as painful as they feared.
The US dollar slipped to near seven-week low against a basket of currencies. The dollar index declined to a low of 94.31, just above the two-month low level of 94.30.
International oil prices steadied as the OPEC and other producers including Russia meet in Algeria this weekend to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian supply.
Benchmark Brent crude futures were at USD 78.93 a barrel in early Asian trading.
Most emerging-market currencies also got some sentimental relief after China said it would not retaliate with competitive currency devaluations.
The forex and money market are closed on Thrusday on account of ‘Muharram’.
The Financial Benchmarks India private limited (FBIL) fixed the reference rate for the dollar at 72.6781 and for the euro at 84.9050.
In the cross-currency trade, the rupee bounced back against the British Pound to finish at 95.07 per pound from 95.84 and gained against the euro to settle at 84.50 as compared to 85.25 earlier.
It also recovered against the Japanese yen to close at 64.42 per 100 yens from 65.13 yesterday.
Meanwhile, the benchmark BSE Sensex tumbled 169 points to end at a near two-month low of 37,121.22, while the broader NSE Nifty dropped 44.55 points to 11,234.35.
Foreign investors offloaded equities worth Rs 2,184.55 crore on a net basis, provisional data showed.
In the forward market, the premium for dollar fell sharply owing to heavy receiving from exporters.
The benchmark six-month forward premium payable in January 2019 dropped to 115-117 paise 121-123 paise and the far-forward July contract also drifted to 273-275 paise from 282.50-284.50 paise.