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 per cent - 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 per cent at 93.96.
Meanwhile, the benchmark BSE Sensex recovered by 290.82 points, or 1.13 per cent, to settle at 26,032.38.