Mumbai: Snapping three-day losing momentum, the rupee recovered by 45 paise to close at 67.78 per dollar on fresh selling of the American currency by banks and exporters in view of sharp recovery in equities.
Banks and exporters preferred to reduce their dollar position on hopes of resumption of foreign capital inflows.
The domestic unit resumed higher at 68.10 per dollar as against the yesterday's closing level of 68.23 at the Interbank Foreign Exchange market and moved up further to 68.1250 before ending at 67.78 per dollar, showing a gain 45 paise or 0.66 percent.
The rupee had dropped by 60 paise or 0.89 percent in previous three trading days.
The dollar index was up by 0.49 percent against a basket of six currencies in the later afternoon trade.
The yen weakened sharply against the dollar and its major rivals in choppy Asia trade today, after the Bank of Japan surprised markets by unexpectedly introducing a negative interest rate policy.
However, US dollar weakened versus the euro yesterday after a disappointing reading on durable-goods orders in December, combined with a dovish outlook from the Federal Reserve on Wednesday.
Oil extended a recent rally in Asia, boosted by weakness in the dollar and Russia saying it could meet the OPEC producers' group for talks on possible output cuts to ease a painful supply glut.
Meanwhile, the benchmark BSE Sensex ended higher by 401.12 points or 1.64 percent today.