Reversing its two-day falling streak, the rupee on Wednesday recovered by 16 paise to close at 67.22 a dollar on fresh selling of the American currency by banks and exporters ahead of the Federal Reserve’s policy announcements.

Recovery in the domestic equity market also boosted the rupee value against the dollar, a forex dealer said. The Sensex bounced back by 131.31 points or 0.53 per cent today.

The domestic unit resumed higher by 67.35 against yesterday’s closing level of 67.38 at the Interbank Foreign Exchange (Forex) market and hovered in a range of 67.2150 and 67.4500 before ending at 67.22 per dollar, showing a gain of 16 paise or 0.24 per cent.

The domestic currency had dropped by 33 paise or 0.49 per cent in two days.

Meanwhile, the dollar index was up by 0.21 per cent against a basket of six currencies in the late afternoon trade.

In the overseas market, the dollar extended a drop against the yen yesterday after an initially strong reading on US retail sales in January was revised sharply lower.

Yesterday, the greenback began weakening after the Bank of Japan left its monetary policies unchanged, but downgraded its global-growth outlook.

However, today the dollar was stable against its major rivals in the late Asian trade, as markets waited for fresh guidance from the Federal Reserve.

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