The dollar also lost some ground against other currencies in the overseas markets.
The rupee resumed higher at 54.89 a dollar as against the yesterday's closing level of 55.31 at the Interbank Foreign Exchange (Forex) Market. It moved between 55.02 and 54.80 a dollar before quoting at 54.95 at 1040hrs.
Sustained capital inflow from foreign funds into the equity market mainly boosted the rupee value against the dollar, a forex dealer said.
Meanwhile, the BSE 30-stock benchmark Sensex has been trading in the green zone.
In New York, the US dollar's decline yesterday, after a report showed retail sales fell, raised concerns among traders that the Federal Reserve would respond by pumping more money into the financial system.