The rupee recovered marginally to close at 96.73 against the dollar on Friday, compared with 96.79 on Thursday, after climbing to an intra-day high of 96.51 in the afternoon.
Traders said the central bank intervened heavily in the market, selling dollars through large state-owned banks, helping the rupee touch the intra-day high.
“However there has been an underlying demand for dollars. Companies were seen covering their positions and buying dollars at lower levels,” a treasury professional said.
Reserve Bank of India governor Sanjay Malhotra said on Wednesday that the Indian currency was undervalued in terms of the real effective exchange rate and that the central bank would ensure the unit found its correct value.
The RBI regularly intervenes in the spot market, using its forex stockpile to support the rupee, which has been among the worst-performing Asian currencies, having lost about 7% so far this year.
