Negative closing in Indian stocks and a firm dollar overseas, however, restricted the rupees rise.
The rupee opened higher at 61.84 a dollar from Mondays close of 61.95 at the Interbank Foreign Exchange market. However, it fell back in afternoon trade to a low of 61.97 tracking a drop in stocks and a strong dollar abroad.
Later, it bounced back on dollar selling by exporters and some banks to a high of 61.78, before settling at 61.79, a net rise of 16 paise or 0.23%. This is its best closing since 61.73 on December 16. In three trading days, the rupee has shot up by 35 paise or 0.56% against the US dollar.
The dollar index was last trading up by 0.12% against a basket of six major global currencies amid low volumes due to a holiday-shortened week. Later in the day, orders for durable goods in November are expected to be out.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: Today dollar index, which tracks the performance of the greenback versus a basket of six major currencies, traded positive as most of the investors are waiting for new year 2014 to open their new books of accounts. Rupee continued to trade strong for the third day in a row and appreciated...Immediate support for USD/INR spot is at 61.50. The trading range for the USD/INR is expected to be within 61.50 to 62.50.