As the US dollar declined and crude oil prices eased, the rupee recovered from its lowest point ever and rose 21 paise to 86.49 against the US dollar in early trading on Tuesday.

Even if the outflow of foreign capital continued to have a negative impact, forex dealers claim that the Indian currency gained support from strong inflation figures and a slight recovery in domestic equity markets.

The rupee started trading at 86.57 versus the US dollar and subsequently lost more ground, closing at 86.49, 21 paise more than it had been at.

At its all-time low of 86.70, the rupee recorded its largest one-day fall in nearly two years on Monday, ending the session 66 paise down against the US dollar.

The one-session decrease of 66 paise was the steepest since February 6, 2023, when the unit fell 68 paise.

After closing at 85.52 on December 30, the Indian rupee has lost more than one rupee in the last two weeks. On December 19, 2024, it broke through the 85-per-dollar barrier for the first time.

A day after showing a slight 5paise gain versus the US dollar, the local currency fell 18paise to close at 86.04 on Friday of last week. It had dropped six and seventeen rupees, respectively, in the previous two sessions on Tuesday and Wednesday.

The dollar index, which gauges how strong the US dollar is in relation to a basket of six other currencies, fell 0.37 percent to 109.41.

Government figures released on Monday showed that retail inflation in December dropped to a four-month low of 5.22 percent. The Reserve Bank had more flexibility to reduce the key interest rate in subsequent monetary policy reviews as a result of the food basket prices falling.

Following its violation of the Reserve Bank of India's (RBI) upper tolerance limit of 6% in October, the Consumer Price Index (CPI)-based inflation rate decreased for the second consecutive month.