Moving in line with the equity market, the rupee trimmed its initial gains but was still quoted higher by 14 paise to 54.34 against the dollar in the late morning trade on fresh selling of dollars by banks and exporters due to lower dollar in overseas.
Persistent capital inflows from foreign funds into the equity market also boosted the rupee value against the dollar, a forex dealer said.
The rupee resumed higher at 54.40 per dollar as against the last closing level of 54.48 per dollar at the Interbank Foreign Exchange (Forex) Market and moved up further to a high of 54.26 per dollar.
However, it declined afterwards to 54.45 per dollar before quoting at 54.34 per dollar at 1040 hrs.
In New York market, the euro edged higher yesterday recovering from losses notched after Italian Prime Minister Mario Monti's decision to step down put Europe's debt crisis back in focus.
Traders were also looking ahead to this week's Federal Reserve meeting for clues on continuation of its policy to purchase longer-dated securities.
Meanwhile, the Indian benchmark Sensex was quoted up by 130 points, or 0.67 per cent, to 19,539.19 at 1050 hrs.