The rupee recovered by 16 paisa to trade at 61.33 against the dollar in early trade on Thursday at the Interbank Foreign Exchange market, tracking positive sentiments after the government approved FDI liberalisation in liberalisation and railways sectors.
Forex dealers said that besides selling of dollars by exporters, strength in other currencies against the American unit overseas also supported the rupee, but a lower opening in the domestic equity market capped the gains.
The Cabinet on Tuesday cleared the long-delayed proposal for raising FDI limit in defence to 49 per cent and fully opened up the railway infrastructure segment, like high-speed trains, for foreign investment.
The rupee had plunged 65 paisa in its biggest single-day drop in over six months to end at 61.49 on Wednesday trade against the greenback, hit by spike in dollar demand and negative cues from local stocks.
The benchmark BSE Sensex fell further by 54.13 points, or 0.21 per cent, to 25,611.14 in early trade on Thursday.