The Indian rupee reversed early losses to close 27 paise higher at 74.61 (provisional) against the US dollar on Tuesday amid a weak greenback overseas.
At the interbank forex market, the domestic currency witnessed heavy volatility. The local unit opened weak at 74.93 a dollar and touched a low of 74.95 and high of 74.55 during the day.
The local unit finally closed at 74.61 against the American currency, registering a rise of 27 paise over its previous close.
On Monday, the rupee had settled at 74.88.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.05 per cent to 92.84.
"In the near term, amid the rising COVID cases in highly vaccinated developed countries coupled with uncertainty over US Fed's next move has re-invigorated the ‘safe-haven’ status of USD," said Rupen Rajguru, Head of Equity Investments and Strategy, Julius Baer.
On a YTD basis, the INR has depreciated against USD more than 2 per cent owing to broad-based strengthening of DXY (dollar index) coupled with strong rebound in crude oil prices (adversely impacting CAD) and rise in negative real rates (impacting FII debt flows), Rajguru said.
On the domestic equity market front, the BSE Sensex ended 354.89 points or 0.68 per cent lower at 52,198.51, while the broader NSE Nifty declined 120.30 points or 0.76 per cent to 15,632.10.
Global oil benchmark Brent crude futures rose 0.22 per cent to USD 68.77 per barrel.
Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 2,198.71 crore, as per exchange data.