The rupee resumed higher at 61.25 per dollar as against the last weekend's level of 61.35 at the Interbank Foreign Exchange (Forex) Market.
It moved up further to 61.09 per dollar before ending at 61.10 dollar, showing a gain of 25 paise or 0.41 per cent.
The domestic unit hovered in a range of 61.09 per dollar and 61.30 per dollar during the day.
Exporters and banks preferred to reduce their dollar position on the back of lower US dollar in the international market, a forex dealer said.
In the global market, the dollar fell to a one-month low against the yen.
The dollar index was lower by 0.20 per cent against a basket of six major global units.
The dollar also slipped versus the Euro and Australian dollar in choppy, holiday-thinned trade.
"The Indian Rupee appreciated against the dollar on Monday in line with other Asian currencies, helped by upbeat trade data from China. It was also supported by local stocks turn higher and lack of outflows. Markets also shrugged off weak industrial production growth data on Friday," said Suresh Nair, Director, Admisi Forex.
Meanwhile, the Indian equity benchmark BSE Sensex ended higher by 86.69 points, or 0.33 per cent, to 26,384.07.
Pramit Brahmbhatt, CEO, Veracity Group, said: "The rupee opened on a positive note and appreciated over a quarter paise to close at 61.10. The gain was supported by stronger Asian currencies as better-than-expected Chinese trade data cheered the market which also helped local Indian indices to trade strong and ended in green for the day."
"Investors are waiting for the CPI data due later in the day to show the road ahead to the market," he further added.
In forwards market, premium fell further on persistent receipts by exporters.
The benchmark six-month premium payable in March eased to 214-216 paise from 221-223 paise previously.
Far-forward contracts maturing in September, 2015 also declined to 440-442 paise from 452-454 paise.
The Reserve Bank of India fixed the reference rate for dollar at 61.2455 and for the euro at 77.6042.
The rupee improved against the pound Sterling to 98.40 from previous close of 98.50 and also strengthened to 77.52 per Euro as compared to 77.65 per euro.
However, it firmed up further to 56.95 per 100 yen from 56.93.