The rupee resumed higher at 60.25 per dollar as against the last closing level of 60.30 per dollar at the Interbank Foreign Exchange (Forex) Market.
It firmed up further to 60.18 per dollar before finishing at 60.24 per dollar, showing a gain of six paise or 0.10 per cent. Intra-day, it hovered in a range of 60.18 per dollar and 60.2850 per dollar.
The rupee had lost 37 paise, or 0.62 per cent, in the previous six sessions.
Banks and exporters preferred to reduce their dollar position in view of sustained foreign capital inflows into equity market, forex brokers said.
The Indian equity benchmark Sensex continued to rule firm for the sixth day and ended higher by 310.63 points, or 1.21 per cent, to finish at 26,025.80.
The dollar index was up by 0.22 per cent against its major global peers.
Pramit Brahmbhatt, Veracity Group CEO said: "Local equities continued its bull run and traded strong to close on a positive note which helped rupee to trade firm against the mighty. But the rupee appreciation was capped by RBI as it intervened the market which curbed the volatility and restricted rupee from gaining further".
Forward dollar premia remained weak owing to consistent receipts by exporters.
The benchmark six-month premium payable in December declined to 222-224 paise from 224.5-226.5 paise yesterday.
Far-forward contracts maturing in June, 2015 also dropped to 465.5-467.5 paise compared to 469-471 paise previously.
The Reserve Bank of India fixed the reference rate for dollar at 60.2360 and for the euro at 81.4414.
The rupee continued to rule firm against the pound at 102.80 over its previous close of 102.99 and rose further to 81.23 per euro as compared to 81.52. It recovered sharply to finish at 59.34 per 100 Japanese yen from 61.11.