However, weakness in local stocks and strong dollar overseas confined the rupee rise, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed lower at 60.82 a dollar from previous close of 60.67. It immediately touched a low of 60.88 on early dollar demand from importers, mainly oil refiners, and firm US dollar overseas.
Later, it rebounded to a high of 60.52 on a sudden gust of dollar selling by exporters and some banks before settling at 60.61 -level not seen since July 31 when it had closed at 60.55. Today, the rupee gained six paise or 0.10 per cent. In straight three sessions, it added 60 paise or 0.98 per cent.
The benchmark S&P BSE Sensex today snapped its six-session gaining streak and closed down by 106.38 points or 0.40 per cent. FIIs picked up shares worth Rs 559.39 crore yesterday, as per provisional data with stock exchanges.
The dollar index hit the 11-month high and was trading above USD 82 --highest since September last year-- against its major global rivals following the gradually strengthening of the US economic outlook.
Investors are now looking to a series of events that may help flesh out the Federal Reserve's monetary policy outlook, including the minutes of the Federal Open Market Committee on Wednesday, and Fed Chairwoman Janet Yellen's speech at Jackson Hole, Wyoming, on Friday.
Pramit Brahmbhatt, Veracity Group, CEO said: "Foreign banks were seen selling dollars but the effect was nullified by the dollar demand from oil importers. Eventually, rupee appreciated slightly. The trading range for the spot rupee is expected to be within 60.20 to 61.00."
Experts said a strong dollar index capped rupee gains.
"The rupee was seen gaining despite the dollar index hitting 82.00 levels during intraday session. The FOMC meeting minutes which will be released today will be closely tracked for further cues on the currency markets," said Abhishek Goenka, Founder and CEO, India Forex Advisors.
In the forward market, premium declined on fresh receipts by exporters.
The benchmark six-month premium payable in January eased to 226.25-228.25 paise from last close of 228-230 paise.
Far-forward contracts maturing in July, 2015 also dropped to 471.5-473.5 paise from 474-476 paise.
The Reserve Bank of India fixed the reference rate for dollar at 60.6690 and for the euro at 80.7255.
The rupee improved further slightly against the pound to 100.92 from 100.97 previously and strengthened to 58.69 per 100 Japanese yen from 59.10.
It also hardened to 80.49 against the euro from 80.99 previously.