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The rupee rose to a near two-month high of 63.4525 on widespread speculation the Reserve Bank of India may be considering extending its swap facility window to provide dollars to state-run oil companies.
Although the RBI has never indicated when it would end the window, traders had been expecting this by the end of the month.
Economic Affairs Secretary Arvind Mayaram said last week oil companies are sourcing 30-40% of their dollar needs in markets. RBI Governor Raghuram Rajan had previously said any tapering of the swap window would be done in a "calibrated" manner.
The rupee was trading at 63.53/54 after falling to as high as 63.4525 to the dollar. It had closed at 63.71/72 on Tuesday.
