Paring early losses, the rupee on Thursday gained 16 paise to close at 53.56 against the US dollar on the back of a rise in local stocks amid fresh selling of the American currency by exporters.
At the Interbank Foreign Exchange market, the domestic unit resumed weak at 53.80 a dollar from Tuesday's close of 53.72 and further touched a low of 53.84 on initial dollar demand from importers.
However, it recovered to a high of 53.42 on emergence of fresh dollar selling by exporters on hopes of fall in dollar value.
It finally settled at 53.56, a gain of 16 paise, or 0.30 per cent. In the last trading day on Tuesday, the rupee had fallen by 25 paise.
Meanwhile, the BSE benchmark Sensex ended up by 48.61 points, or 0.26 per cent.
Foreign institutional investors injected $79.59 million on Tuesday, taking the total to almost $2.3 billion in the current month till October 23,
"The rupee traded on mix-to-firm note just ahead of the long weekend tracking sharp volatility in equity markets and dollar index moves.
"It initially moved lower in the first half on weak domestic equity markets but pared weakness on firming up of European market on an avalanche of earnings," Alpari Financial Services (India) CEO Pramit Brahmbhatt said.
"The Cabinet reshuffle over the weekend and upcoming Reserve Bank of India monetary policy meet has set the domestic factors on back foot.
"The Indian market continues to dance to the tunes of liquidity in international markets," he added.
The dollar index was down by 0.23 per cent against a basket of six major rivals after the US Federal Reserve continued to express concern about the economy and made no changes to its ultra-easy monetary policies.
