The rupee rebounded from the six-month low and appreciated by 55 paise to 70.85 against the US dollar in early trade on Wednesday amid positive opening in domestic equity market and easing crude oil prices.
On Tuesday, the rupee had plunged 62 paise to close at a nearly six-month low of 71.40 against the US dollar in line with battered equities as global market turmoil and Argentine currency crash drove investors to safe havens.
At the interbank foreign exchange, the rupee opened at 71.00, then gained momentum and touched a high of 70.85, registering a rise of 55 paise over its previous close of 71.40.
The domestic unit pared some gains and was trading at 70.92 against the dollar at 0953 hrs.
Forex traders said US delaying new tariffs on Chinese electronics to December 15, also helped investor sentiments.
Market participants further said that positive opening in domestic equity market, encouraging macro data and easing crude oil prices supported the domestic unit, however, foreign fund outflows weighed on local currency.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 638.28 crore on Tuesday, according to provisional exchange data.
Consumer price index-based retail inflation eased marginally to 3.15 per cent in July on the back of softening fuel and light prices, even as overall food prices moved up, government data showed on Tuesday.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.03 per cent to 97.78.
Brent crude futures, the global oil benchmark, fell 1.04 per cent to trade at USD 60.66 per barrel.
Domestic bourses opened on a bullish note on Wednesday with benchmark indices Sensex trading 108.70 points higher at 37,066.86 and Nifty up 35.50 points at 10,961.35.
The 10-year government bond yield was at 6.58 per cent in morning trade.