The rupee staged a smart recovery on Wednesday, recouping most of the previous day's loss on strong foreign capital inflows and the euro's rise to a two-month peak against the dollar. Traders said the Indian central bank had also limited its rupee-selling intervention in the session, having pushed the rupee to a one-week closing low on Tuesday through sustained dollar purchases by state-run banks.
The rupee closed at 43.440/445 per dollar, 0.21 percent up from 43.530/535 on Tuesday, when it slid 0.26 percent.
"The euro bounce did help and probably gave the central bank a reason to stop intervening as well," a treasury head at a foreign bank said.
Earlier, the European single currency gained 1 percent against the dollar after a break of key technical resistance around $1.2260 triggered broad-based dollar selling.
The euro, which mainly gained from chart-based trading as traders await Friday's US jobs data for clues on further rate hikes, also drew support from a survey showing eurozone service sector growth edged up last month as new business strengthened.
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