The rupee commenced slightly weak at 55.00 a dollar from previous close of 54.98 at the Interbank Foreign Exchange (Forex) market and immediately touched a low of 55.07.
However, it later bounced back to a high of 54.70 on dollar selling by exporters and some banks and increased foreign funds inflow in equities.
The domestic currency ended the day at 54.75, showing a rise of 23 paise or 0.42 per cent, extending gains for the second straight session. Yesterday, it had surged by 25 paise or 0.45 per cent.
Meanwhile, the Indian benchmark Sensex today closed lower by 75.93 points, or 0.38 per cent, while Foreign Institutional Investors (FIIs) injected USD 162.33 million yesterday, taking a total to almost USD 1.4 billion in the current calender so far, as per Sebi data.
The dollar index was up by 0.16 per cent against a basket of six major global rivals.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The INR extended its gains for the second consecutive session on exporter and bank selling at higher levels. The Crisil revising the growth numbers upwards for FY2014 also added to INR strengths. The focus has now shifted towards the ECB meet over the rate cut decision by it in tomorrow's policy." (MORE)