Sustained capital inflows of over Rs 450 crore from foreign funds into equity market also supported the rupee's gain against the dollar, forex dealers said.
The rupee resumed higher at 55.23 per dollar compared to its the last closing level of 55.34 per dollar at the Interbank Foreign Exchange (Forex) Market.
The rupee gains became pronounced just before mid-day in Europe as the euro rose against the dollar after German judges removed a major obstacle to the region's new bailout fund, European Stability Mechanism (ESM). The rupee soon after hit 55.14, its best in three weeks.
Dollar wilted further as investors focussed on US Fed's next meeting amid rising expectations of further stimulus.
But mixed UK employment data dented demand and rupee fell to 55.37 per dollar, before ending better at 55.21 -- a rise of 13 paise, or 0.23 per cent.
"Rupee got a lot of support on the back of positive news flow from Europe in the form of German court's consent to bailout funds. This prompted Euro to go beyond 1.29 level, which pushed the domestic currency," Hemal Doshi, Currency Strategist, Geojit Comtrade.
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