MUMBAI: Rupee clawed back from a six-day slide on Tuesday, a day after hitting its lowest in 14 months, supported by a bounce in the euro and firmer shares.
A relaxation in norms for foreign institutional investments in long-term infrastructure bonds issued by companies also helped raise expectations for a revival in inflows, traders said.
Foreign funds are net sellers of about $2 million of debt securities so far this month after buying $681 million in August.
At 11:26 a.m. (0556 GMT), the partially convertible rupee was 0.3 per cent stronger at 47.08/09 per dollar, and traders said it could strengthen to as much as 46.90 during the day on the back a recovery in shares.
"The sentimental impact of the relaxation in infrastructure debt norms is being reflected in the rupee level," said a senior foreign exchange dealer at a state-owned bank.
"A retracement is not surprising given the too fast move we have seen in past couple of days."
On Monday, it had fallen 1.5 per cent -- the biggest one-day slide in more than 15 months -- to 47.22/23, after July industrial output growth unexpectedly slumped to 3.3 per cent, the slowest pace in nearly two years as a series of rate increases crimped demand.
The rupee, which hit 47.23 during trade on Monday, its weakest since July 22, 2010, has lost 2.4 per cent against the dollar over the past one week as euro zone debt crisis slammed the euro.
The euro was at $1.3659 on Tuesday, surging from an overnight low of around $1.3495, after the Financial Times reported that Italy had asked China to make "significant" purchases of Italian debt.
It was at $1.3623 when the rupee closed on Monday. India's benchmark share index rose 1.5 per cent in tandem with a rebound across Asia as concerns eased about the euro zone debt woes.
The index of the dollar against six major currencies was at 77.172 points, compared with 77.264 at end of rupee trade on Monday.
The one-month onshore forward premium was at 16.50 points from 16.75 on Monday, the three-month was at 44.75 points from 44.25 and the one-year was at 117.25 points from 114.50.
One-month offshore non-deliverable forward contracts were quoted at 47.34, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all at 47.2250. The total volume was $2.4 billion.
