The dollar was under pressure on hopes of US Federal Reserve chief Ben Bernanke later in the day dropping hints on monetary easing at the Jackson Hole conference in Wyoming.
At the Interbank Foreign Exchange (Forex) market, the rupee opened lower at 55.75 a dollar from yesterday's close of 55.63. It immediately touched a low of 55.77 on month-end dollar demand from importers amid fall in stocks ahead of first quarter GDP data.
However, with the euro rising to an eight-week high against the dollar before the speech by Bernanke, rupee recovered sharply. Any further step to increase money supply will be typically negative for the dollar.
With India's April-June quarter GDP growth coming at 5.5 per cent, a tad better than 5.2-5.3 per cent estimate put out by most economists, the sentiment in favour of rupee also improved.
"India's Q1 GDP numbers surprised the street which has been projecting sharp declines," said Pramit Brahmbhatt, CEO, Alpari Financial Services (India).
The rupee settled at the day's high of 55.52, up 11 paise or 0.20 per cent on a spate of dollar selling by exporters.
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The dollar index, a gauge of six major global rivals, was down by 0.49 per cent in cautious trade.
"The rupee gained on account of euro raising against the dollar. Investors wait for the speech by US Federal Reserve Chairman Ben Bernanke that could offer clues on the central bank's next policy steps," said Abhishek Goenka, Founder & CEO, India Forex Advisors. (MORE)