Mumbai, July 13 - The Indian rupee today bounced back with a vengeance by a whopping 79 paise to close at one-week high of 55.15 against the US currency following heavy dollar selling by exporters amid decline in trade deficit and sustained capital inflows, snapping two-day gaining streak.

However, late weakness in local stocks as well as better dollar overseas could not able to stem the rupee rise, a forex dealer said.

Heavy dollar selling by exporters and some banks on hopes of fall in dollar value overseas helped the rupee recovery.

Country's imports declined by 13.46 pct while exports contracted by 5.45 pct, year-on-year basis, which aided the trade deficit to come down, also helped the rupee rise. Trade deficit in Q1 has declined to USD 40.06 billion from USD 46.30 billion in April June last fiscal.

At the Interbank Foreign Exchange (Forex) market, the local unit resumed remarkably higher at 55.65 against previous close of 55.94 and immediately touched a low of 55.75 on early rise in local equities amid firm dollar overseas.

However, it rebounded later after the trade deficit data filtered in and touched a high of 55.10 before concluding at 55.15, showing a sharp rise of 0.79 paise or 1.41 pct, biggest gain since July 3, 2012 when it was spurted by 1.05 paise or 1.89 pct. In last two days, it had dropped by 55 paise or 0.99 per cent.

Foreign Institutional Investors remained buyers in the current month so far and they infused about USD 1.3 billion in the current month till July 12, as per Sebi data.

The dollar index surrendered its early smart gains, still quoting up by 0.02 pct against its six major rivals in Europe today. PTI