The rupee recovered 13 paise to 40.24/25 against the US currency in late morning deals on dollar selling by exporters.
In dull trade at the Interbank Foreign Exchange (Forex) market, the domestic unit opened strong at 40.28/30 a dollar from overnight close of 40.37/38.
Later, it improved further to quote at 40.24/25 a dollar in late morning deals.
Dealers attributed smart recovery in the rupee to stable local equity market as the benchmark Sensex was up by over 47 points at 10 30 am.
Dollar selling by exporters at higher levels also helped the rupee to surge, they added.
On Monday, the rupee had ended over five-month low of 40.37/38.
Meanwhile, the dollar notched a fresh all-time low against the euro for the fifth straight session after a report released on Monday confirmed the US manufacturing sector is shrinking.