Strong foreign fund inflows into stocks and a recovery in local equities after initial losses also supported the Indian rupee.
At the interbank foreign exchange market, the Indian rupee opened lower at 62.38 a dollar from yesterday's close of 62.26, a one-month low. It dropped further to 62.56 amid a fall in local stocks and dollar demand from importers.
The rupee bounced back to a high of 62.14 as local equities recovered and ended at 62.16, a rise of 10 paise or 0.16 per cent.
"During the last few hours, rupee started gaining, helped by RBI as it sold dollars in the market. Overall in this week, rupee has depreciated by around 1.2 per cent," said Abhishek Goenka, CEO of India Forex Advisors.
In the previous two trading days, the rupee had dipped 46 paise. Over the past five days, the local currency has lost 31 paise, its first weekly drop in three.
The benchmark 30-share S&P BSE Sensex rebounded from early losses and closed 37 points lower. Overseas investors bought shares worth a net Rs 674.05 crore yesterday, as per provisional data.
"Rupee fell to a one-month low as the dollar strengthened against emerging Asian currencies, taking cues from positive US economic data...RBI likely to have intervened and sold dollars via state run banks at 62.50 levels, which eventually helped the rupee to close on a strong note," said Pramit Brahmbhaat, CEO of Alpari Financial Services (India).
Forward dollar premiums remained weak on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in June moved down to 247-249 paise from the overnight close of 248-1/2 to 250-1/2 paise and far-forward contracts maturing in December softened to 486-488 paise from 488-490 paise.
The RBI fixed the reference rate for the dollar at 62.4075 and for the euro at 85.1950.
The rupee recovered to 102.33 against the pound from 102.97 yesterday and turned positive to end at 84.79 per euro from 85.21. It dropped further to 59.51 per 100 Japanese yen from 59.07.