After falling about 39 paise in the previous two days, the rupee resumed higher at 62.19 per dollar as against the last closing level of 62.23 per dollar at the Interbank Foreign Exchange (Forex) Market.
It firmed up further to 62.05 per dollar, before settling at 62.12 -- a daily gain of 11 paise or 0.18 per cent.
Sustained foreign capital inflows coupled with recovery in the equity market mainly boosted the rupee value against the dollar, a forex dealer said.
As per bourses data, Foreign Institutional Investors (FIIs) pumped Rs 603.41 crore in equities today.
The BSE benchmark Sensex recovered 164.11 points, or 0.80 per cent, to close at 20,700.75. Yesterday, it fell by 186 points on fears of more US stimulus cuts and weak China data.
The rupee, however, depreciated 19 paise this week, snapping the trend of consecutive gains in the previous two.
"It has been an overall bearish week for the Indian rupee. The week was full of significant events and data releases. The FOMC minutes and US data were seen grabbing all the attention. Strong manufacturing data from the US was seen overshadowing the poor manufacturing numbers from China." said Abhishek Goenka, Founder & CEO, India Forex Advisors.
Technically, the USD-INR pair has taken a strong support at 61.80 levels, and is seen inching higher towards 62.30-62.50 levels, he added.
Forward dollar premiums continued to decline in view of persistent export receipts.
The benchmark six-month forward dollar premium payable in July dropped to 225.5-227.5 paise from 229-231 paise yesterday.
Far forward contracts maturing in January 2015 also tumbled to 468.5-470.5 paise from 473-475 paise.
The RBI fixed the reference rate for the dollar at 62.1618 and for the euro at 85.2685.
The rupee edged up further to 103.60 against the pound sterling from 103.61 previously. It advanced further to 85.15 per euro from 85.21.
The rupee recovered sharply against the 100 Japanese yen to 60.63 from 61.05 yesterday.