The rupee recovered from initial losses to settle 11 paise higher at 71.43 against the US currency on Wednesday, tracking gains in domestic equity markets and softening crude oil prices.
Foreign fund inflows also supported the local currency, forex trader said.
At the interbank foreign exchange market, the rupee opened at 71.60 against the US dollar. During the day, the domestic unit fluctuated between a high of 71.36 and a low of 71.71.
On Tuesday, the domestic unit had settled at 71.54.
"Strong equity markets, FII inflows, lower Brent crude prices and ICE Dollar Index helped the rupee recoup some of the losses seen on the previous day," said V K Sharma, Head - PCG & Capital Market Strategy, HDFC securities.
Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services Private Ltd said, "The rupee traded in a range as market participants remained cautious ahead of the important Brexit summit scheduled later this week. On the domestic front, focus will now shift to RBI meeting minutes that will be released on Friday and dovish outlook could keep the rupee under pressure."
Meanwhile, Brent futures, the global oil benchmark, traded below USD 59 per barrel level on trade uncertainty.
Foreign institutional investors (FIIs) remained net buyers in the capital markets, as they infused Rs 686.33 crore on Tuesday, exchange data showed.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.05 per cent to 98.34.
The 10-year government bond yield was at 6.47 per cent on Wednesday.
On the domestic market front, the 30-share Sensex ended 92.90 points, or 0.24 per cent, higher at 38,598.99. It hit an intra-day high of 38,666.38 and a low of 38,416.67. The broader NSE Nifty rose 35.70 points, or 0.31 per cent, to settle at 11,464.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.3186 and for rupee/euro at 78.7419. The reference rate for rupee/British pound was fixed at 90.4134 and for rupee/100 Japanese yen at 65.82.