At the Interbank Foreign Exchange market, the rupee resumed higher at 55.34 from its previous close of 55.48.
The currency moved in a tight range of 55.45 and 55.11 before concluding at 55.12, showing a rise of 0.65 per cent or 36 paise. This recoups yesterday's 37 paise loss.
Traders said while the rupee was under pressure in the first half, it strengthened later in line with the Indian stock market benchmark Sensex closing 94 points higher.
There was support from capital inflows with FIIs having pumped in Rs 125 crore in stocks, as per provisional BSE data.
With the dollar index, a gauge of six major currencies, down by 0.21 per cent, selling of dollars from exporters and banks also pushed the rupee value higher.
Experts said the dollar index fell for a fifth day on speculation the Federal Reserve and the Chinese government will take steps separately, dampening the demand for dollar.
"The rupee witnessed a volatile session remaining weak in the first half tracking rising dollar index but strengthened in the second half following local cues. It also gained strength on hopes of reforms to be initiated after the Presidential elections," said Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said.
All eyes will now be on the RBI and US Fed policy meet due on the same day (July 31) which will again make the markets volatile, said Abhishek Goenka, Founder & CEO, India Forex Advisors. (MORE)
