Forex dealers said a weak dollar overseas also boosted the rupee sentiment, cutting short a two-day losing trend. The local unit commenced slightly lower at 55.10 against the dollar at the Interbank Foreign Exchange (Forex) market and touched a low of 55.21.
The rupee then touched a high of 54.94 before settling at 54.95, a net gain of 11 paise, or 0.2%. In the last two sessions, the local unit had dipped by 51 paise.
The rupee regained some of the lost ground of the previous session in a thinly traded day tracking the firm tone of domestic equity markets. Rising capital inflows and a weaker tone of dollar index supported gains in the local currency during the session, said Alpari Financial Services (India) CEO Pramit Brahmbhatt.
The dollar index was up 0.19% against a basket of six major global currencies.
Rupee witnessed modest gains amid a recovery in the euro above 1.3200 and slight weakness in the US dollar index. Worldwide, all the major markets remain closed on account of the Christmas holidays, which will result in low trading volumes in the Indian markets during the next couple of sessions," said Abhishek Goenka, founder & CEO, India Forex Advisors).