Indian rupee was trading at 62.26/27 against US dollar versus its previous close of 62.09/10 as short-covering triggered after pair fails to drop below 62 levels in opening trade despite larger-than-expected fall in retail inflation rate.
Traders say several banks rushed to buy the greenback after the pair continued to show strong support around the 62.05 level in early trade.
Losses in the domestic sharemarket also aided sentiment for the pair. The benchmark share index trading down 0.6 percent.
India's retail inflation slowed to a two-year low in January, providing some relief to the ruling Congress party ahead of national polls, but a third straight fall in industrial output in December offered little hope for an economic rebound.
Moving in line with equity market, the Indian rupee fell by 20 paise to 62.30 against the American currency in late morning trade today on fresh dollar demand from banks and importers.
Indian rupee down 20 paise, trades at 62.30 vs US dollar
(PTI) The Indian unit resumed higher at 62.05 per dollar as against the last closing level of 62.10 at the Interbank Foreign Exchange (Forex) Market, on initial selling of dollars by exporters in view of its weakness overseas.
However, it washed out initial gains and was quoted at 62.30 per dollar at 1045 hours on fresh demand for the US currency from banks amidst fall in the equity market.
In New York, the dollar fell against the British pound yesterday after the Bank of England raised its projections for UK growth in 2014. However, analysts warned that gains against the dollar could be limited.
Meanwhile, the Indian benchmark BSE Sensex dropped by 79.13 points or 0.39 per cent to 20,369.36 at 1045 hours.