The rupee recovered by 42 paise to 73.15 against the US currency in early trade on Wednesday on fresh dollar selling by exporters amid easing crude oil prices and higher opening in the domestic equity markets.
Dealers attributed the rupee's fall to increased demand for the US currency from importers and sustained foreign fund outflows.
The benchmark BSE Sensex, in opening trade, on Monday, rose 321.41 points to 34,637.04.
The rupee had settled 13 paise lower at 73.61 against the US dollar on Wednesday.
The flagship index swung nearly 880 points both ways on alternate bouts of buying and selling during the session.
On Friday, the rupee had ended 55 paise higher at 73.57 against the dollar, as global crude prices eased and domestic indices staged a smart rebound.
Both indices ended the week higher for the first time in six weeks. During the period the Sensex climbed 366.59 points and Nifty rose 156.05 points.
The remarks by Martin Rama, the Chief Economist for the South Asia region of the World Bank, came as the rupee hit an all-time low of 74.45 against the US dollar on Thursday.
Forex dealers said besides strong demand for the American currency from importers, concerns of fears of rising fiscal deficit and capital outflows weighed on the domestic currency.
The domestic currency failed to sustain the momentum after Brent crude breached the USD 84 per-barrel-mark again and the US dollar strengthened overseas.
Besides, the dollar's overseas weakness, easing global crude oil price and higher opening in the domestic stock market supported recovery in the domestic unit, traders said.
Foreign investors have pulled out over Rs 9,300 crore (USD 1.3 billion) from the Indian capital markets in the last four trading sessions.
The BSE Sensex too plunged by 584.53 points, or 1.66 per cent, to 34,584.63 in late afternoon trade.
Consistent dollar demand from importers, mainly oil refiners, following higher crude oil prices, kept the rupee under pressure.
The rupee was trading at 72.84 against the dollar in the morning as investors are waiting for the RBI policy decision later this week.
Ongoing global trade war concerns and surging global crude prices caused some discomfort for the rupee and restricted the gains. Heavy month-end dollar demand from importers also weighed on the forex front.
A higher opening of the stock market also supported the rupee, a dealer said.
The rupee on Wednesday rebounded by 9 paise to end at 72.60 against the dollar.
The rupee had lost 6 paise to close at 72.69 on Tuesday due to sustained demand for the American currency amid soaring crude prices.
On Monday, the local currency had ended sharply lower by 43 paise to 72.63 against the US dollar.
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