Dollar selling by exporters and banks amid a strong opening in the domestic equity market also supported the local unit, forex dealers said.
The government's decision to hike diesel prices by Rs 5 per litre yesterday, which would help bringing down the fiscal deficit, was another positive factor, they said.
Meanwhile, the BSE benchmark index Sensex climbed 406.45 points, or 2.26 per cent, to 18,427.61.
Euro rose against the dollar overseas after the US Federal Reserve announced further monetary easing measures aimed at boosting the world's largest economy.
The rupee had lost 22 paise yesterday to close at 55.43 against the dollar on fresh demand for the American currency from banks and importers.
