At the Interbank Foreign Exchange (Forex) market, the local unit resumed strong at 61.37 a dollar from previous close of 61.49.
It later moved in a wide range of 61.21 and 61.55 before finishing at 61.22, showing a rise of 27 paise or 0.44 per cent. This is its best single session gain since 38 paise rise on July 2.
Yesterday, the rupee had slumped by 65 paise, or 1.07 per cent, to end at five-month low as dollar demand weighed.
Pramit Brahmbhatt, CEO, Veracity Group said: "Rupee ended strong today and posted its third daily gain in four days. Rupee was mainly supported by the RBI intervention through state run banks which tried to heal the wounded rupee."
The trading range for the spot USD/INR pair is expected to be within 60.80 to 61.80, he added.
Meanwhile, the equity benchmark S&P BSE Sensex today closed further down by 76.26 points, or 0.30 per cent in a volatile session. FIIs picked up shares worth Rs 283.87 crore yesterday, as per provisional data.
The dollar index was marginally up against its major global rivals ahead of the outcome of a European Central Bank meeting and weekly jobless claims data.
"The Indian rupee has traded poorly in recent days. The onshore spot rate has shifted back to its highest level since early March. And if the cracks in broader risk appetite become larger, the pressure on the INR to weaken will intensify. Once again this would put the spotlight on FX policy," said HSBC Global Research in a report.
Overall, we believe that the policy preference for exchange rate stability still exists but this cannot be guaranteed, especially if a climate of US dollar strength gathers momentum, it added.
In the forward market, premium declined further on sustained receipts by exporters.
The benchmark six-month premium payable in January moved down to 243.25-245.25 paise from 246.5-248.5 paise previously.
Far-forward contracts maturing in July, 2015 also slipped to 489.5-491.5 paise from 491-493 paise.
The Reserve Bank of India fixed the reference rate for dollar at 61.4123 and for the euro at 82.1672.
The rupee recovered against the pound to 103.16 from 103.49 yesterday and also rebounded to 59.86 per 100 Japanese yen from 60.07. It firmed up to 81.89 per euro from 82.02.