The rupee on Tuesday gained 14 paise to close at 61.88 against the dollar on selling of the US currency by exporters and banks even as stock markets fell.
Dollar selling by exporters and some banks for the second day in a row amid sustained capital inflows supported the rupee even as the American currency gained in global markets, dealers said.
"Rupee appreciated by almost quarter per cent taking cues from the positive comments given by the RBI during the announcement of credit policy," Pramit Brahmbhatt, the CEO of Veracity Group, said.
The Reserve Bank of India (RBI) kept its key rates unchanged in its fifth bi-monthly monetary policy review and made dovish comments regarding rate cut as early as March next year if disinflationary process set in.
At the Interbank Foreign Exchange (Forex) market, the local unit commenced better at 61.99 a dollar from previous close of 62.02 and immediately touched a low of 62.02 on weak domestic stocks amid firm dollar overseas.
Later, it bounced back on dollar selling by exporters and some banks to a high of 61.87 before concluding at 61.88, a net rise of 14 paise or 0.23 per cent.
The benchmark BSE Sensex dipped further by 115.61 points while FPIs/FIIs picked up shares worth $64.04 mln on Monday.
The dollar index was up by 0.27 per cent against its six major global rivals.
The trading range for the spot rupee is expected to be within 61.50 to 62.30, Brahmbhatt said.
