The rupee recovered 88 paise from its all-time closing low to 87.93 against US dollar in early trade on Wednesday, on easing dollar index after the US Fed indicated more rate cuts in the current year.
Forex traders said all decline in crude oil prices and reports of RBI intervention supported the domestic currency.
At the interbank foreign exchange market the rupee opened at 88.74 against the US dollar, then gained momentum and touched 87.93, registering a gain of 88 paise from its previous close.
It was later trading at 88.33 against the American currency.
On Tuesday, the rupee depreciated 13 paise to close at an all-time low of 88.81 against the greenback.
FED Chair Jerome Powell spoke on Tuesday and indicated more rate cuts in the current year as the unemployment rises. He also flagged concerns on the stubborn inflation and warned about future risks arising out of tariffs and restrictive immigration policies, said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.20 per cent lower at 98.85.
"The dollar index fell slightly to 99.03 levels down about 0.24 per cent from the previous session as market anticipated concerns over US-China trade tensions and the persistent US Shutdown, both of which have influenced the investors sentiment and supported the dollar in the short term even though the global economic uncertainty remains elevated.
"With no economic data from US as the shutdown continues for a third week typically affecting the dollar moves," Bhansali added.
Brent crude, the global oil benchmark, was trading 0.43 per cent lower at USD 62.12 per barrel in futures trade, as the US shutdown continues into the third week with no signs of reconciliation from any side.
On the domestic equity market front, Sensex climbed 354.57 points to 82,384.55 in early trade, while the Nifty was up 109.55 points to 25,255.05.
Foreign Institutional Investors sold equities worth Rs 1,508.53 crore on Tuesday, according to exchange data.
