The mild recovery in the rupee comes a day ahead of the outcome of a bi-monthly policy review by the Reserve Bank of India's Monetary Policy Committee, which began a three-day meeting on Monday.

The rupee gave up most of the gains in afternoon trade during the session. It was last seen trading at 70.68 against the US dollar on Tuesday. It had settled at 70.73 against the dollar on Monday - its biggest single-day fall since August 2013.

Analysts say some pressure is likely to continue in the currency due to the escalating tensions on the US-China trade front.

"The rupee has depreciated sharply as the trade conflict continues to escalate between the US and China," said Rushabh Maru of brokerage Anand Rathi.

Weakness in the dollar provided some support to the rupee, however, rising crude oil prices kept the upside in check. The dollar index - which measures the greenback against six major peers - edged lower. It was last seen trading down 0.08 per cent at 97.4420.

Brent futures - the global benchmark for crude oil - climbed 58 cents, or 1 per cent, to $60.39 a barrel on Tuesday after earlier dipping to their lowest since January 14 at $59.07 a barrel.

"Focus will now shift to the RBI monetary policy. It is expected to cut repo rate by at least 25 bps but its guidance will be important," Mr Maru said.

The Reserve Bank of India is widely expected to lower the key interest rates on Wednesday. A poll by news agency Reuters last month showed the central bank was set to cut interest rates further.

Gains in the domestic equity markets - which rebounded after plunging more than 1 per cent the previous day - amid buying in financial, auto and metal stocks also supporter the forex market.