Tracking local stocks, rupee on Tuesday regained 19 paise to end at 61.85 against dollar as reports of easing geopolitical tension between Russia and Ukraine helped emerging market currencies script a smart recovery.
Continued dollar inflow from foreign funds in stocks and selling of the American currency also aided the sentiment, said forex traders.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed lower at 62.12 a dollar from previous close of 62.04 and touched a low of 62.15 on initial hesitancy in local shares.
It later bounced back to a high of 61.82 before closing at 61.85, a rise of 19 paise or 0.31 per cent.
On Monday, it had settled down 29 paise or 0.47 per cent. The dollar index was down by 0.13 per cent against its major global rivals as fears eased after reports of Russian troops withdrawal.
The ruble climbed about 0.7 per cent versus the dollar after dropping 1.8 per cent yesterday. Poland's zloty rose nearly 0.7 percent versus the euro, after a sharp slide on Monday. Japan's Yen dropped versus all its 16 major peers.
"The rupee ended on a positive note amid easing geopolitical concerns globally. The Russia-Ukraine conflict has been threatening the global sentiments and boosting the demand for safe haven since last couple of sessions.
"However these concerns are getting eased as Russia's President ordered troops in military drills in central and western Russia to return to base," said Abhishek Goenka, Founder and CEO, India Forex Advisors.
Meanwhile, forward dollar premium fell back on fresh receipts by exporters. The benchmark six-month premium payable in August moved down to 256.5-257.5 paise from 259.5-261.5 paise previously.
Far forward contracts maturing in February 2015 also dropped to 503-504.5 paise from 509-511 paise. The RBI fixed the reference rate for dollar at 61.9045 and for the euro at 85.1365.
The rupee recovered against the pound to 103.20 from 103.78 and also turned positive to end at 85.12 per euro from 85.47 previously. It also rebounded to 60.75 per 100 Japanese yen from 61.27.
