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The rupee strengthened by 14 paise to close at 66.41 against the US dollar on Wednesday on persistent selling pressure from banks and exporters amid hopes of resumption of foreign capital inflows in equity markets. The domestic unit resumed sharply higher at 66.38 against yesterday's level of 66.55 at the Interbank Foreign Exchange (Forex) market.
It hovered in a range of 66.24 to 66.46 during the day before finishing at 66.41, showing a gain of 14 paise, or 0.21 per cent.
The domestic currency has gained 41 paise, or 0.62 per cent, in last two trading sessions. In the global market, the dollar index was up by 0.41 per cent against a basket of six currencies.
Oil prices edged higher in Asian trade as dealers set aside weak Chinese trade data and look ahead to the release of a US stockpiles report, analysts said.
The euro strengthened against the dollar yesterday after strong readings on trade and economic growth in the Eurozone helped support the shared currency.
The euro benefited from second-quarter economic growth in the Eurozone, which was revised higher to 0.4 per cent, while trade data showed July was a good month for German exporters.
Meanwhile, the benchmark BSE Sensex rose further by 401.71 points, or 1.59 per cent, to settle at 25,719.58.
In forward market today, premium for dollar maintained a steady trend due to mild transactions.
The benchmark six-month premium payable in February eased to 203-205 paise from 203.5-205 paise yesterday and far forward August 2016 contracts inched up to 417-419 paise from 417-418 paise previously.
The RBI fixed the reference rate for the dollar at 66.2945 and for the euro at 73.9847.
The rupee also firmed up against the pound, euro and the Japanese yen.
The rupee rose against the pound sterling to close at 102.00 as against 102.44 yesterday and firmed up against the euro to 73.99 from 74.29.
It also closed higher against the Japanese currency to finish at 54.99 per 100 yen as against 55.47 yesterday.