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In line with equity markets, the rupee recovered by 28 paise to close at 66.55 against the dollar on fresh selling of the American currency by banks and exporters amidst a weak greenback in overseas markets.
The domestic unit resumed marginally higher at 66.77 against Monday's two-year low of 66.83 at the interbank foreign exchange (Forex) market.
It hovered in a range of 66.7950 and 66.5325 before ending at 66.55, showing a recovery of 28 paise.
The rupee has dropped 63 paise, or 0.95 per cent, in the previous three trading days.
The dollar index was down marginally against a basket of six currencies in late afternoon trade.
Besides, the US dollar was lower against the yen and the euro in Asian trade today, as early afternoon weakness in the benchmark Nikkei Stock Index soured risk sentiment and induced buying of the Japanese and Eurozone currencies, which are considered safe-haven assets.
The currency market initially was slow to respond to Chinese trade data today, which showed much faster pace of decline in imports than expected and a decline in exports for the second straight month.
Meanwhile, the benchmark BSE Sensex recovered by 424.06 points, or 1.70 per cent, at 25,317.87.
