The rupee on Tuesday recovered from its two-week low to end steady at 66.60 against the American currency, inching up by a paisa on the back of mild dollar selling.
Stable overseas environment after an overnight turmoil in currency and financial markets worldwide provided some kind of temporary relief to the rupee, a forex dealer said.
The home currency had plunged to hit a two-week low on Monday spooked by global economic and political headwinds.
The domestic unit commenced firmly higher at 66.53 against overnight close of 66.61 at the Interbank Foreign Exchange (forex) market and strengthened further to touch an intra-day high 66.42 following renewed dollar selling.
However, the rupee trimmed its initial gains on fresh dollar demand from importers and retreated sharply to 66.66, before ending at 66.60, showing a marginal gain of one paise or 0.02 per cent.
In the meantime, the dollar rebounded to trade broadly higher against major currencies amid mounting tensions in the Middle East.
The dollar index, which tracks the world's reserve currency against a basket of its peers, is up by 0.45 per cent at 99.38.
The stock market flagship index Sensex declined by 43.01 points to close at 25,580.34, while the broader Nifty fell just 7 points to settle at 7,784.65.
Foreign investors turned net sellers and sold shares worth Rs 667.15 crore yesterday, provisional data showed.
In forward market, premium for dollar fell owing to fresh receivings from exporters.
The benchmark six-month premium payable in June eased to 202-203 paise against 203-204 paise previously and far forward December 2016 contract also moved down to 412.5-413.5 paise from 413-414 paise earlier.
The RBI fixed the reference rate for the dollar at 66.5418 and for the euro at 72.0315.
In cross-currency trades, the rupee recovered smartly against the pound sterling to end at 97.74 from Monday's close of 98.41 and recouped against the euro to finish at 71.69 as compared with 72.63 on Monday.
The home unit also regained against the Japanese Yen to settle at 55.94 from overnight level of 56.07 per 100 yen.
