The rupee pared its initial losses to recover slightly by 2 paise to 66.94 against the American currency in late morning trade on bouts of dollar selling by banks and exporters amid higher equities.
The rupee opened lower at Rs 67.05 per dollar from yesterday's closing level of Rs 66.96 at the Interbank Foreign Exchange (Forex) market.
Later, it slid further to Rs 67.07 before recovering to quote at 66.94 at 1030 hours.
The domestic unit hovered in range of Rs 67.07 and Rs 66.93 per dollar in late morning deals.
Somewhat bearish dollar overseas and sustained FII inflows lifted the rupee sentiment, a forex dealer said.
Meanwhile, the dollar index was trading up at 0.02 per cent at 96.01 against a basket of six currencies in early trade.
Overseas, the US dollar was trading mostly flat against its major rivals in early Asian trade, but wavered against the yen and euro ahead of a closely-watched US non-farm jobs report on Friday which is expected to shape the market's near-term interest rate expectations.
Meanwhile, the benchmark BSE Sensex was trading higher by 47.12 points, or 0.17 per cent, to 28,499.29 at 1050 hrs.
In the meantime, the country's foreign exchange reserves
rose by USD 1 billion to USD 367.14 billion for the week ended October 21.
Foreign portfolio investors (FPIs) offloaded shares worth USD 526.49 million last week.
Domestic bourses succumbed to late profit-taking despite a promising start following selling in frontline technology stocks amid ongoing corporate earning woes.
The flagship Sensex shed 53.60 points to end at 27,876.61 while the broader Nifty settled a tad higher at 8,626.25.
In the forward market, premium for dollar showed an easy trend due to lack of market-moving factors.
The benchmark 6-month premium for April ended at 173.5-175.5 paise from 174.5-175.5 paise and the forward- October 2017 contract settled at 346.5-348.5 paise from 347.5-348.3 paise earlier.
Crude prices traded a notch higher after rebounding from 1-month low overnight amid mounting uncertainty over the OPEC production output cut talks later this month.
