The rupee rebounded from its all-time low levels and gained 19 paise to close at 91.71 (provisional) against the US dollar on Tuesday, on decline in US dollar index and India-EU FTA negotiations.
Forex traders said the rupee recovered marginally as traders rushed to cover broad dollar weakness.
Moreover, the deal over India-EU FTA boosted domestic market sentiments. However, rising commodity and crude oil prices capped sharp gains.
At the interbank foreign exchange, the rupee opened at 91.82 and lost ground to touch an intra-day low of 91.90 against the greenback. The domestic unit settled for the day at 91.71 (provisional), registering a gain of 19 paise from its previous close.
On Friday, the rupee hit a historic low of 92 per dollar and gained marginally to settle at 91.90 against the American currency.
Forex and equity markets were closed on Monday for Republic Day.
"We expect the rupee to trade with a slight positive bias as India-EU FTA may boost domestic market sentiments. Weakness in the US dollar index may further support the rupee," said Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan.
However, selling pressure from FIIs and ongoing geopolitical tensions may pressure the rupee at higher levels.
"The US has threatened Canada with 100 per cent tariffs and to raise tariffs on South Korea to 25 per cent from 15 per cent currently. USDINR spot price is expected to trade in a range of 91.30 to 92," Choudhary added.
Meanwhile, India and the European Union on Tuesday announced the conclusion of negotiations for the free trade agreement (FTA), under which a number of domestic sectors such as apparel, chemicals and footwear will get duty-free entry into the 27-nation bloc, while the EU will get access to the Indian market at concessional duty for cars and wines, an official said.
The deal has been termed as the "mother of all deals" as it will create a market of about 2 billion people.
Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, was trading 0.02 per cent lower at 97.01.
Brent crude, the global oil benchmark, was trading 0.02 per cent higher er at USD 65.60 per barrel in futures trade.
On the domestic equity market front, Sensex climbed 319.78 points to settle at 81,857.48, while the Nifty surged 126.75 points to 25,175.40.
Foreign institutional investors offloaded equities worth Rs 4,113.38 crore on Friday, according to exchange data.
India's foreign exchange reserves jumped USD 14.167 billion to USD 701.36 billion during the week ended January 16, the Reserve Bank said on Friday.
The overall reserves had increased by USD 392 million to USD 687.193 billion in the preceding week.
Except for the headline, this story has not been edited by The Telegraph Online staff and has been published from a syndicated feed.
