The rupee gained slightly on positive domestic equities.
The rupee gained against the dollar on Wednesday, snapping a four-session losing streak, buoyed by a recovery in domestic stocks after a five-day losing run, but the dollar's reign is likely to limit the currency's relief rally.
PTI reported that the rupee gained to settle at 76.21 provisionally, and Reuters quoted the currency was last changing hands at 76.114 per dollar.
After opening at 76.41 against the dollar, the rupee hit an intra-day high of 76.16 and finally closed at 76.21. On Tuesday, the rupee had dropped 21 paise to close at 76.50, weakening for the fourth straight session.
Indian equity benchmarks settled higher, halting a five-session fall led by gains in automobile and energy stocks.
While crude oil prices recovered some of their losses during a volatile trading session on Wednesday, futures contracts crashed over 5 per cent previously.
That helped the energy-sensitive currency somewhat.
But capital outflows have hurt the rupee in recent weeks, with foreign institutional investors dumping Indian shares worth Rs 5,871.69 crore on Tuesday, according to the latest stock exchange data.
The rupee's appeal is likely to be short-lived on growth and runaway inflation worries.
The International Monetary Fund cut the growth outlook for Asia's third-largest economy, cautioning that the ongoing Russia-Ukraine war will, in the long run, hurt consumption and also growth as inflation rises.
"The IMF, in its report, cut India's GDP forecast on weaker demand and lower exports. It also said that many countries might need to raise interest rates "well above "neutral levels to combat inflation," wrote the Currency Desk at Emkay Global Financial Services, in their perspective note on the rupee.
"The report also added that the Russian invasion of Ukraine and sanctions 'will test' resilience of the global financial system," added the note.
Increasing global price pressures will likely push most major central banks toward faster and larger tightening policies, with the US Federal Reserve predicted to lead the way.
Several Fed policymakers have spoken in favour of multiple 50 basis points rate hikes, including a 75 basis points lift at the May meeting.
The expected dollar strength on interest rate differential dynamics is also likely to weigh on emerging market currencies, including the Indian one.
"We expect the rupee to trade under pressure until the (USD/INR) pair fails to recover below 76.00. The depreciation will extend towards 77.00/77.15 in that case," noted the Currency Desk at Emkay Global Financial Services.