Mumbai: Staging a strong recovery, the rupee on Friday gained 7 paise to end at 67.76 against the American currency, a day after succumbing to pressure created by US Federal Reserve's rate hike.
The domestic currency managed to tide over the weak sentiment created by trade deficit ballooning to two-year high in November.
Overall forex market sentiment improved somewhat a day after the Federal Reserve's historic episode of monetary tightening, triggering panic dollar demand.
The home currency remained under pressure on Thursday, tumbling by a whopping 40 paise in the midst of Fed-inspired volatility.
The US central bank raised rates by 25 bps to 50-75 bps on Wednesday for the first time in a year and projected its commitment of three rate hikes in 2017.
Aggressive selling of the American unit by exporters and banks largely aided the recovery momentum even as the apex bank intervened through state-run banks, a forex dealer said.
Growing confidence in country's growth outlook, which stands the best among its world peers at 7.3 per cent also bolstered the sentiment, he added.
At the Interbank Foreign Exchange (forex) market, the domestic unit opened steady at 67.83 but quickly fell back to a low of 67.86 on initial dollar demand.
However, overcoming the volatility, the rupee recouped smartly in afternoon deals to hit an intra-day high of 67.7325 before ending at 67.76, showing a gain of 7 paise or 0.10 per cent.
In the meantime, country's exports rose for the third straight month in November, recording a growth of 2.29 per cent, though the trade deficit shot up to about two-year high of USD 13 billion mainly due to increase in gold imports.
The US dollar index was quoted lower at 102.82 in late afternoon trade.
Meanwhile, the RBI on Friday fixed the reference rate for the dollar at 67.7777 and euro at 70.7531.
In cross-currency trades, the rupee hardened further against the pound sterling to settle at 84.31 from 84.68 but retreated modestly against the euro to close at 70.78 from 70.66 on Thursday.
The local currency too dropped against the Japanese yen to finish at 57.34 as compared to 57.20 per 100 yens earlier.