The rupee on Thursday closed just paise higher at 54.77 against US dollar on better local equities.
Continued dollar investments in shares by foreign funds helped the rupee close in the positive zone while firm dollar overseas kept the rupee's rise under check, said traders.
At the Interbank Foreign Exchange market, the local unit commenced nearly flat at 54.77 a dollar from last close of 54.78. It moved in a range of 54.65 and 54.89 before settling at 54.77, showing a rise of one paisa.
On Wednesday, rupee had closed 3 paise higher. The Indian benchmark S&P BSE Sensex on Thursday improved further by 34.37 points, or 0.17 per cent.
FIIs bought shares worth over Rs 1,070 crore (Rs 10.7 billion) on Thursday, as per provisional data with stock exchanges.
The dollar index was up by 0.10 per cent against a basket of six major global rivals, ahead of a slew of data that could offer more evidence on whether an economic recovery is under way in the US.
"The rupee was seen trading in the range of 24 paise.
"On the domestic front, rupee found some support from the positive stock markets. However the gains in the rupee were restricted by the fall in the Euro and continued strength in the US dollar index," said Abhishek Goenka, Founder & CEO, India Forex Advisors.