The rupee had weakened by 20 paise to close at 70.92 against the dollar on Friday.
The rupee rebounded by 43 paise to close at 70.49 against the dollar on Tuesday largely driven by positive macro data and easing crude prices. Forex traders said heavy buying in domestic equities and sustained foreign fund inflows also propped up the local unit.
At the forex market, the domestic unit opened slightly down at 70.95. During the day, the local unit, however, gathered momentum and rose to an intra-day high of 70.43 before finally ending at 70.49, showing a gain of 43 paise. The local unit had weakened by 20 paise to close at 70.92 against the dollar on Friday. The domestic forex market and equity market were closed Monday on account of Mahashivratri.
Commenting on the appreciation in rupee, Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management said, "Over last one month the Indian rupee has appreciated 1.5 per cent and is the best performing emerging market currency".
Sentiments in the forex market also got a boost from the positive macro data. The country's services sector activity gathered momentum in February, and rose from 52.2 in January to 52.5 in February, indicating an upturn in output.
Foreign investors put in Rs 751.92 crore on a net basis in capital markets on Tuesday, provisional exchange data showed.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.06 per cent to 96.73.
Brent crude futures, the global oil benchmark, slipped 0.17 per cent to $65.63 per barrel lending support to the local unit.
Domestic equities benchmark Sensex on Tuesday surged by nearly 379 points to close at 36,442. The NSE Nifty too rose nearly 124 points to close a tad below the psychological 11,000-level.