The gains in emerging market currencies came after Russias president ordered troops in military drills in central and western Russia to return to base, increasing hopes of a peaceful solution in Ukraine.
The rupee has been trading on the risk-on risk-off sentiment. Volumes are thin as people are avoiding trading in volatile markets, said Naveen Raghuvanshi, a senior forex dealer at DCB Bank.
The partially convertible rupee closed at 61.856 versus Mondays close of 62.04 per dollar.
With no major trigger, the rupee is largely expected to trade rangebound ahead of general elections due by May.
The economy, however, continues to be a matter of concern as contracting industrial output and an investment slowdown dragged Indias economic growth to a worse-than-expected 4.7% in the three months to December.
In the offshore non-deliverable forwards, the one-month contract was at 62.25 while the three-month was at 62.98.