Fresh capital inflows and a rally in stocks helped the rupee rise. The dollar index was last trading almost stable against its major global rivals in overseas markets.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced strong at the day's high level of 61.15 from previous close of 61.31.
Later, rupee met with strong resistance and fell back to a low of 61.30 before concluding at 61.27, a rise of four paise or 0.07 per cent. In straight four sessions, rupee has gained 58 paise or 0.91 per cent.
The Indian benchmark S&P BSE Sensex today rallied by 212 points or 0.80 per cent to end at one-month high, extending gains to the fourth session in a row.
FIIs bought shares worth USD 18.85 million yesterday, as per Sebi data.
Pramit Brahmbhatt, Veracity Group CEO, said, "Rupee continues to trade strong tracking the gains in local equities. The trading range for the spot rupee is expected to be within 60.80 to 61.80."
Today's closing for rupee is the strongest level since 61.1 against US dollar on October 13, 2014.
In the forwards market, premium recovered on fresh payments by banks and corporates.
The benchmark six-month premium payable in March edged up to 200.5-202.5 paise from 199-201 paise previously.
Far-forward contracts maturing in September, 2015 also rose to 421.5-423.5 paise from 414.5-416.5 paise.
The Reserve Bank of India fixed the reference rate for dollar at 61.2355 and for the Euro at 77.9650.
The rupee bounced back against the pound to 98.36 from 99.05 yesterday and also rebounded to 57.30 per 100 Japanese yen from 57.43 while remained firm to end at 77.87 per euro from 78.18.
The Forex and Money markets will remain closed tomorrow and day after tomorrow, October 23 and 24, 2014, on account of local holidays.