The Indian rupee today broke its three sessions of losing string and closed higher by 25 paise at 54.98 against the US dollar following fresh selling of American currency by exporters amid sustained capital inflows.
Recovery in local stocks also helped the rupee rise.
At the Interbank Foreign Exchange (Forex) market, the domestic currency resumed higher at 55.15 a dollar from last close of 55.23.
Recovery in stocks and renewed dollar selling by exporters aided the rupee to settle at the day's high of 54.98, a rise of 25 paise or 0.45 pct.
In the previous three sessions, it had tumbled by 88 paise or 1.62 pct.
Meanwhile, the Indian benchmark Sensex closed up by 51.10 points, or 0.26 per cent, while Foreign Institutional Investors (FIIs) picked up shares worth USD 180.53 million yesterday, as per Sebi data.
The dollar index was up by 0.06 per cent against a basket of six major global currencies.
Alpari Financial Services (India) CEO Pramit Brahmbhatt said: "The INR reversed the weakness of mid session into strong gains tracking rising capital inflows and firmer tone of equity markets..."
"The INR also regained the lost ground as the government stayed away from expanding its borrowing and also postponed its bond auction this week thereby not further adding to the national debt. The measures to improve or bring down the twin deficits have also been welcomed by the markets," he added.
The premium for the forward dollar ended higher on fresh paying pressure from banks and corporates.
The benchmark six-month forward dollar premium payable in June finished up at 168-170 paise from previous close of 165-1/2-167-1/2 paise.
Far-forward contracts maturing in December also firmed up to 314-1/2-316-1/2 paise from 309-311 paise.
The RBI has fixed the reference rate for the US dollar at 55.3278 and for euro at 72.5680.
The rupee also recovered against the pound sterling to 88.46 from Monday's close of 88.66, while moved down further to 72.11 per euro from 72.
It also remained weak against the Japanese yen to 62.87 per 100 yen from last close of 62.83.