The rupee ended at a new 26-month high for the third day in a row as the dollar remained weak overseas, with some dollar buying by state-owned companies to pay for imports capping the local unit's gains.

The rupee finished at 46.68/69 to a dollar, off 46.65 struck in the morning, but up from its previous close of 46.7000/7050. It last closed above this level on April 10, 2001, at 46.5525/5600.

It has now gained 0.43 per cent in three days.

"A few public sector companies were buying dollars cheap, with a large state-run bank buying for them at around 46.65 and that capped the rupee's gains," said a dealer at a foreign bank.

"Otherwise, all other companies were sellers."

Traders said the central bank was again largely inactive, offering little support to the greenback even as foreign funds and companies who had borrowed overseas brought in dollars.

"There has been little to no support over the past three days, except for Wednesday's brief support at 46.7 towards close.

That, along with the strong supplies, is lifting the rupee," a dealer at a state-run bank said.

The Reserve Bank of India has a policy of broadly allowing the market to determine rates and intervening only to curb volatility.