The rupee gained 57 paise to close at 81.78 (provisional) against the US dollar on Tuesday, the biggest single-day gain since November.
Forex traders said the rupee was the best performer among Asian currencies and now has the support of 81.70.
At the interbank foreign exchange market, the local unit opened at 82.20 and touched an intra-day high of 81.72 and a low of 82.26 against the greenback.
It finally ended at 81.78 (provisional), registering a rise of 57 paise over its previous close.
On Monday, the rupee settled at 82.35 against the dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, advanced 0.12 per cent to 103.12.
On the domestic equity market front, the 30-share BSE Sensex declined 631.83 points or 1.04 per cent to end at 60,115.48, while the broader NSE Nifty fell 187.05 points or 1.03 per cent to 17,914.15.
Global oil benchmark Brent crude futures rose 0.13 per cent to USD 79.75 per barrel.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Monday as they offloaded shares worth Rs 203.13 crore, according to exchange data.
With inputs from Agencies.
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