The rupee today gained for the first time in three days and closed up 12 paise to 62.56 against the dollar on fag-end sales of the US currency.
After dropping 27 paise in the previous two sessions, the rupee's strength was also linked to anticipation of spectrum auction inflows and a weak American currency overseas.
At the Interbank Foreign Exchange (Forex) market, the domestic currency resumed slightly lower at 62.70 a dollar from last weekend's close of 62.68.
It later fell further to a low of 62.79 on weak local stocks, worries over recent cut in US stimulus and lacklustre Chinese data. However, later the rupee bounced back to settle at day's high of 62.56, a rise of 12 paise or 0.19 per cent.
The dollar index was down 0.14 per cent against a basket of six major currencies when local forex markets ended.
"The initial weakness was due to poor China data and strength in US dollar index. Fed's decision of tapering its asset purchase programme every month is seen getting reflected in emerging market currencies," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
Data showing India's manufacturing sector in January expanded at the strongest pace in 10 months, helped sentiment.
Pramit Brahmbhatt, CEO, Alpari Financial Services, (India) observed that rupee's rise was aided by the dollar index trading weak as investor focus on emerging-markets fears faded. "The trading range for the USD/INR pair is expected to be within 62.00 to 63.50," he said.
The BSE Sensex slipped about 305 points to end at its lowest level in over 11 weeks today.
