Snapping the two-day fall, the rupee on Thursday recovered 16 paise against the dollar to close at 56.08 after slipping to a record low of 56.52 on exporters selling the US currency to lock profits.
At the Interbank Foreign Exchange (Forex) market, the rupee opened weak at 56.50 and soon dipped further to a new low of 56.52 after poor GDP data and weak show in stocks hit the sentiment.
After rising to a high of 55.74 intra-day, the rupee finally closed at 56.08, up 16 paise over its previous close of 56.24. This cuts short rupee's two-day fall in which it had lost a massive 106 paise or 1.90 per cent.
However, for the month as a whole, rupee depreciated 6.34 per cent in May, the worst monthly performance in 6 months.
"Today's rupee movement was reflective of a month-end phenomenon. However, after the domestic currency touched Rs 56.50 level, exporters started selling dollars. There were also some selling of dollar by public sector banks," said N S Venkatesh, Head of Treasury, IDBI Bank.
The dollar extending losses against the euro on anticipation of an Irish vote in favour of Europe's fiscal pact helped support the rupee. Dealers said besides this, talk of RBI asking oil firms to buy dollars from state-run banks also aided the rupee.
"Today, rupee movement was mainly due to the rumour in the market that RBI has asked oil companies to buy dollar from four state run banks, after which Foreign banks started liquidating their position. But, clarification came from the central bank denying such a move," said TS Srinivasan, GM (Treasury), Indian Overseas Bank.
Meanwhile, though stock market barometer Sensex closed in the red but a late recovery in stocks also helped the rupee.
The BSE index finally ended 93.62 points lower, recovering from a fall of over 225 points intra-day.
