The Indian rupee hit a fresh 6-month trough against the dollar on Tuesday but ended off the day's low after a recovery in local shares and a suspected touch of central bank intervention to curb its losses.
The rupee came under early pressure alongside other Asian currencies and as Indian stocks followed regional markets lower. Foreign investors also made use of an arbitrage opportunity provided by a higher dollar rate in the offshore non-deliverable forwards market by buying dollars onshore and selling them overseas.
"Things have stabilised a bit... I think the Reserve Bank (of India) said enough is enough," said a dealer with a foreign bank, adding the central bank was suspected of selling dollars to check further rupee depreciation.
"I think the picture now does not look as bleak as it was yesterday or early today."
The partially convertible rupee closed at 45.5150/5300 per dollar, its lowest in six months and 0.12 percent down from Monday's 45.4650/4750. It hit an intra-day six-month low of 45.64.
Dealers said the local currency market would watch to see how other Asian currencies behaved against the dollar on Wednesday and how the domestic stock market performed after sharp losses in the past week.
Indian shares bounced back from a 3.75 percent fall on Tuesday as funds trawled for bargains after three sessions marked by heavy losses. The benchmark BSE index ended up 0.44 percent.