The rupee commenced strong at 57.75 a dollar from last close of 57.98 at the Interbank Foreign Exchange (Forex) market, but fell back to the day's low of 57.93 on sustained dollar demand from importers.
However, it later rebounded to a high of 57.4525 on rally in domestic equities amid expectations of some positive steps to be taken by the Finance Minister to spur economic growth. It closed at 57.51, a rise or 47 paise or 0.81 per cent.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Rupee traded strong against the dollar taking cues from the strong local equities which closed on a positive note as today inflation data was out and reading was the lowest in more than three years. The trading range for the Spot USD/INR pair is expected to be within 57.00 to 58.00."
On a weekly basis, the rupee finished 0.78 per cent or 45 paise down, extending the losses to the sixth week.
Finance Minister P Chidambaram today said temporary economic problems cannot be solved by "quick-fixes" and the government will continue to take measures with long-term perspective to deal with them. He further said the government will announce steps by the end of this month or next month to boost investment and growth.
Meanwhile, the Indian benchmark S&P BSE Sensex today closed higher by 350.77 points, or 1.86 per cent as slower inflation and strength in rupee revived rate cut hopes.