Mumbai, (PTI) Underpinned by a retreat in the US dollar, the battered rupee rebounded smartly from its 39-month low as it ended higher by 27 paise at 68.46 amid adequate supply of the greenback.

Aggressive selling of the American unit by exporters and banks largely added to the recovery momentum even as the central bank intervened through state-owned lenders.

The local unit opened a tad higher at 68.72 as against overnight closing level of 68.73 at the forex market and continued its strong recovery momentum to hit a fresh intra-day high of 68.30 in late afternoon deals.

It ended at 68.46, a neat 27 paise gain, or 0.39 per cent - snapping its five straight days of retreat.

The home currency had settled at 68.73 on Thursday.

A strong rally in domestic equities too had a positive influence.

The relentless climb of the dollar had led to an emerging market currency rout on Thursday, sending rupee to its record intra-day low of 68.86 on heightened fears over capital funds outflow.

Leading into the weekend, the Thanks-giving Day break in the US helped moderate a powerful rally in the dollar though the forex market sentiment remained fragile, a dealer said.

Despite this, supporting factors for the dollar remain strong as the US Fed is getting ready for a policy rate increase this year on the back of labour force improvement, rising US yields and a likely push to spending by President-elect Donald Trump to fast-track the economy.

Some two weeks ago the rupee traded at about 66.43 -- its strongest level in two months -- before retreating to the current levels.

The US dollar index was quoted lower at 101.49 in late afternoon. It had reached as high as 102.05 on Thursday, the highest since March 2003.

Meanwhile, RBI today fixed the reference rate for the dollar at 68.46 and euro at 72.38.

In cross-currency trades, the rupee rebounded against the pound sterling to finish at 85.28 from 85.73 and firmed up further against the euro to end at 72.53 compared with 72.68 yesterday. It also gained further ground against the Japanese yen to conclude at 60.66 from 60.82 per 100 yens earlier.