The currency gained 0.8 per cent to 41.42 against the dollar as of 12:19 p.m. in Mumbai, according to data compiled by Bloomberg. It trimmed this week's decline to 1.9 per cent after earlier slumping as much as 2.6 per cent, the most since November 1997. The rupee closed at 41.60.
The currency rallied as much as 1 per cent, paring this week's decline, as a weaker rupee bolsters earnings of exporters including Tata Consultancy Services, the country's biggest software maker. Investors may have also bought the local currency as the US dollar fell from an eight-week high against the euro yesterday.
"The dollar-rupee rose faster than anyone's anticipation and the levels are attractive to sell if you are an exporter," said Sanjay Arya, treasurer at state-owned Bank of Maharashtra in Mumbai. "There isn't much scope for the dollar to rise any further because importers seem to have covered a large part of their needs in the last few days."
The rupee is still the second-worst performer this year among the 11-most traded currencies in Asia as crude oil's advance to a record yesterday renewed concern the nation's trade and current-account deficits will widen. It has dropped 4.9 per cent this year, Bloomberg data show.
The rupee's fall "is reflecting the global uncertainties, involving both the trade and capital accounts", central bank Governor Yaga Venugopal Reddy told reporters yesterday. "Trade and current-account deficits may marginally deteriorate this year, but this will be comfortably financed by capital inflows." He didn't elaborate.
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