The rupee today bounced back by 47 paise to close at one-week high of 57.51 against the US dollar following strong recovery in local stocks and fresh dollar selling by exporters.
The rupee commenced strong at 57.75 a dollar from last close of 57.98 at the Interbank Foreign Exchange (Forex) market, but fell back to the day's low of 57.93 on sustained dollar demand from importers.
However, it later rebounded to a high of 57.4525 on rally in domestic equities amid expectations of some positive steps to be taken by the Finance Minister to spur economic growth. It closed at 57.51, a rise or 47 paise or 0.81 per cent.
Gains would have been larger as FII outflows worth over Rs 300 crore did not support the local currency's fight back even as the dollar index was up by 0.21 per cent against a basket of six major global rivals.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Rupee traded strong against the dollar taking cues from the strong local equities which closed on a positive note as today inflation data was out and reading was the lowest in more than three years. The trading range for the Spot USD/INR pair is expected to be within 57.00 to 58.00."
On a weekly basis, the rupee finished 0.78 per cent or 45 paise down, extending the losses to the sixth week.
CRISIL Research said: "The recent slide in the rupee to near 60 per dollar mark has raised eyebrows on all fronts...We believe that the current slide will be temporary and that the rupee will strengthen from current lows."
Finance Minister P Chidambaram today said temporary economic problems cannot be solved by "quick-fixes" and the government will continue to take measures with long-term perspective to deal with them. He further said the government will announce steps by the end of this month or next month to boost investment and growth.
Meanwhile, the Indian benchmark S&P BSE Sensex today closed higher by 350.77 points, or 1.86 per cent as slower inflation and strength in rupee revived rate cut hopes.
