The weaker dollar in the overseas market also boosted the rupee value.
In a volatile trade on Tuesday, the rupee snapped its two-day losing streak against the US currency by recovering 4 paise to 67.90 on fresh selling of dollars by banks and exporters despite sustained fall in equities.
The weaker dollar in the overseas market also boosted the rupee value, a forex dealer said.
The domestic unit resumed lower at 68.14 per dollar as against Monday's closing level of 67.94 at the Interbank Foreign Exchange (Forex) market and dropped further to 68.22 on initial dollar demand from banks and importers.
However, it recovered from initial losses to 67.89 on selling of dollars by banks and exporters before concluding at 67.90, showing a gain of four paise or 0.06 per cent.
It has dropped by 39 paise or 0.57 per cent in two days.
The domestic currency moved in a range of 67.89 and 68.22 per dollar during the day.
The dollar index was down by 0.21 per cent against a basket of six currencies in the late afternoon trade.
In New York, the US dollar fell to a 15-month low against the yen yesterday, as a renewed slide in oil prices and doubts about the effectiveness of the Bank of Japan's negative interest-rate policy drove investors back into the safe-haven currency.
The dollar tumbled today to its weakest level against the yen since late 2014 in the international market, as plunging oil prices dragged global stocks lower, helping to support haven assets like the Japanese currency and US Treasuries.
Pramit Brahmbhatt of Veracity Financial Services said, "Taking cues from global equity market, we saw the rupee opening weaker below 68 levels. As expected, the rupee found support near 68.22 levels and recovered afterwards to 67.89 before finishing at 67.90."
Trading range for spot USD/INR pair is expected to be within 68.3 to 67.5 levels.
The benchmark Sensex dropped further by 266.44 or 1.10 per cent to close at 24,020.98.
In forward market, premium for dollar edged up further on buying pressure from banks and importers.
The benchmark six-month premium payable in July closed steady at 202-204 paise while far forward January 2017 contract inched up further to 413-415 paise from 412-414 paise yesterday.
The RBI fixed the reference rate for the dollar at 68.1623 and for the euro at 76.3827.
In cross-currency trades, the rupee dropped against the pound sterling to end at 98.05 from 97.84 yesterday and also fell against the euro to 76.18 from 75.50.
The domestic unit fell further against the yen to 59.06 from 58.22 per 100 yen.
