The Indian rupee recovered by 13 paise to 61.46 against the American currency after initial losses following bouts of selling of dollars by banks and exporters amid strong recovery in the equity market.
Persistent foreign capital inflows also boosted the rupee value against the dollar, a forex dealer said.
The Indian rupee resumed higher at 61.57 per dollar as against the last closing level of 61.59, but dropped immediately to 61.70 on dollar demand from banks and importers.
However, it recovered afterwards to 61.45 before quoting at 61.46 per dollar at 1040hrs.
Meanwhile, in New York market, the US dollar was flat to slightly higher versus most major rivals other than the yen yesterday as worries about China's banks spurred a round of haven-related buying, strategists said.
The Indian benchmark sensex crossed 21K mark after 35 months and was quoting at 20,964.80 at 1050hrs, showing a sharp gain of 196.92 or 0.95 pct from its last close.