In line with equity market, the rupee today ended higher by nine paise to close at 65.96 against the US currency on persistent selling of dollars by banks and exporters amid sustained capital inflows.
Weakness of dollar in the overseas market also affected the market sentiment.
The rupee resumed sharply lower at 66.33 per dollar against yesterday's close of 66.05 at the Interbank Foreign Exchange market and dropped further to 66.41 on initial month-end dollar demand from importers.
However, it recovered afterwards to 65.92 due to rise in equity market before finishing at 65.96 per dollar, showing a gain of 0.09 paise or 0.14 per cent.
The rupee has gained by 20 paise or 0.30 per cent in two days.
The US dollar weakened against the yen today as investors moved into haven assets amid a sell-off in stocks and industrial commodities like oil and copper.
The dollar also lost ground to the euro after official data showed pending US home sales fell to a five-month low in August.
The dollar index currently trading lower by 0.03 per cent against a basket of six currencies.
Meanwhile, the S&P BSE benchmark sensex failed to maintain mid-session gains on the back of lower global cues despite steeper-than-expected rate cut by the Reserve Bank of India (RBI) by 0.50 per cent after its fourth bi-monthly monetary policy review for the year 2015-16.
The Indian benchmark BSE Sensex ended up by 161.82 points or 0.63 per cent.
