After two days of decline, the rupee today staged a recovery by gaining 10 paise to 67.10 against the US dollar on fresh selling of the American currency by exporters and banks.

Robust capital inflows into the domestic equities and also weak dollar overseas against its major rivals also boosted the market sentiment.

The home currency opened lower at 67.23 a dollar as compared to overnight closing level of 67.20 at the Interbank Foreign Exchange market here on bouts of dollar demand from importers and banks.

It largely traded in a narrow range in scattered deals as lack of definite cues restricted the momentum during the initial hour of trade.

However, moving in line with a recovery in local stocks alongside adequate dollar supply, the rupee made a smart comeback to close at 67.10, showing a gain of 10 paise, or 0.15 per cent.

The rupee had lost 29 paise in previous two days.

The RBI fixed the reference rate for the dollar at 67.1462 and euro at 74.3443.

In cross-currency trades, the rupee strengthened further against the pound sterling to settle at 88.30 against 89.06 on Monday and edged up against the euro to end at 74.12 from 74.28.

The domestic unit also rebounded against the Japanese yen to finish at 63.21 per 100 yen from 63.56 earlier.

Meanwhile, the dollar index was trading higher by 0.02 per cent at 96.57 against a basket of six currencies in the early trade.

Overseas, the US dollar was mostly mixed against its major rivals in early Asian trade.

While yen hovered near 3-1/2-week lows amid combination of growing expectations of monetary easing by the Bank of Japan, a broad recovery in risk appetite and speculation about M&A-related yen-selling.