Mumbai: Reversing its two-day falling streak, the rupee on Wednesday recovered by 16 paise to close at 67.22 per dollar on fresh selling of the American currency by banks and exporters ahead of the Federal Reserve's policy announcements.
Recovery in the domestic equity market also boosted the rupee value against the dollar, a forex dealer said. The Sensex bounced back by 131.31 points or 0.53 per cent on Wednesday.
The domestic unit resumed higher by 67.35 against Tuesday's closing level of 67.38 at the Interbank Foreign Exchange (Forex) market and hovered in a range of 67.2150 and 67.4500 before ending at 67.22 per dollar, showing a gain of 16 paise or 0.24 per cent.
The domestic currency had dropped by 33 paise or 0.49 per cent in two days.
Meanwhile, the dollar index was up by 0.21 per cent against a basket of six currencies in the late afternoon trade.
In the overseas market, the dollar extended a drop against the yen on Tuesday after an initially strong reading on US retail sales in January was revised sharply lower.
On Tuesday, the greenback began weakening after the Bank of Japan left its monetary policies unchanged, but downgraded its global-growth outlook.
However, on Wednesday the dollar was stable against its major rivals in the late Asian trade, as markets waited for fresh guidance from the Federal Reserve.
Pramit Brahmbhatt of Veracity Financial Services said, "Taking cues from weak global equity market, the rupee opened on a weaker note but continued to find support near 67.50/USD.
Following to global equity market, domestic market too opened on a negative note. But a recovery in domestic equity market helped the rupee to gain lost ground.
To end the day, the rupee ended with a gain of 16 paise at 67.22/USD. Trading range for spot USD/INR pair is expected to be within 66.80 to 67.50/USD for the day.
In forward market, premium for dollar dropped further due to persistent receivings from exporters.
The benchmark six-month premium for August dropped to 217-219 paise from 223-225 paise on Tuesday while far forward February 2017 contract also closed lower at 423-425 as against 432-434 paise.
The RBI fixed the reference rate for the dollar at 67.3680 and euro at 74.7583.
In cross-currency trades, the rupee firmed up further against the pound sterling to finish at 94.73 from 95.41 on Tuesday and moved up against the euro to close at 74.48 from 74.72.
The domestic unit recovered against the yen to settle at 59.24 per 100 yen from 59.50
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