The rupee on Thursday gained 36 paise to close at 55.12 against the US dollar on sustained capital inflows amid exporters selling the US currency.
At the Interbank Foreign Exchange market, the rupee resumed higher at 55.34 from its previous close of 55.48.
The currency moved in a tight range of 55.45 and 55.11 before concluding at 55.12, showing a rise of 0.65 per cent or 36 paise.
This recoups yesterday's 37 paise loss.
Traders said while the rupee was under pressure in the first half, it strengthened later in line with the Indian stock market benchmark Sensex closing 94 points higher.
There was support from capital inflows with foreign institutional investors having pumped in Rs 125 crore (Rs 1.25 billion) in stocks, as per provisional BSE data.
With the dollar index, a gauge of six major currencies, down by 0.21 per cent, selling of dollars from exporters and banks also pushed the rupee value higher.
Experts said the dollar index fell for a fifth day on speculation the Federal Reserve and the Chinese government will take steps separately, dampening the demand for dollar.
"The rupee witnessed a volatile session remaining weak in the first half tracking rising dollar index but strengthened in the second half following
"It also gained strength on hopes of reforms to be initiated after the Presidential elections," said Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said.
All eyes will now be on the RBI and US Fed policy meet due on the same day (July 31) which will again make the markets volatile, said Abhishek Goenka, Founder & CEO, India Forex Advisors.
Brahmbhatt said, "The government is most likely to raise diesel prices and cut the subsidy in LPG in next week to avoid downgrading further credit ratings.
The global cues still remain a threat to the rupee as currency cannot remain immune to the grim global economic outlook."
The premium for the forward dollar ended steady to better on stray paying pressure from banks and corporates.
The benchmark six-month forward dollar premium payable in December settle at its overnight level of 160-162 paise.
However,the premium for far-forward contracts maturing in June ended higher at 308-310 paise from 304-306 paise.
The RBI fixed the reference rate for the dollar at 55.3830 and for euro at 68.0639.
The rupee recovered against the pound sterling to end at 86.46 from its last close of 86.54 and also moved up to 67.74 per euro from 67.80.
The rupee recouped losses against the Japanese yen to close at 70.15 per 100 yen from its previous close of 70.27.
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