The rupee continued its upward march for the third straight day on Wednesday by gaining eight paise to close at 55.49 against US dollar on continued selling of the American currency by exporters and robust capital inflows.
At the Interbank Foreign Exchange (Forex) market, the rupee opened at 55.45 a dollar from its last close of 55.57.
Later, it exhibited side-ways movement as it traded in a tight range of 55.36-55.55 before closing at 55.49, a rise of eight paise. In the last three days, it has gained 26 paise against the dollar.
Some weakness in the local stock market amid a rising trend pared rupee's early gains, forex dealers said.
They added that the late dollar demand from importers, mainly oil refiners, was seen ahead of Greece Prime Minister's meeting with the Eurogroup head later today.
The dollar index, consisting of six major currencies, was up by 0.14 per cent while New York crude oil was trading around $96.5 a barrel in Europe today.
Foreign Institutional Investors (FIIs) injected nearly Rs 100 crore (Rs 1 billion) today as per stock exchanges data, helping support rupee.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The rupee shed most of its gains towards the end on rebound in dollar index. The dollar index rebounded from its low of 81.85 levels to above 82.00 levels as expectations of stronger economic numbers in later session and the FOMC minutes shall dampen the QE hopes".
The rupee is consolidating for a long time and we see a break-out coming soon drifting the rupee to 56 levels, said Abhishek Goenka, Founder & CEO, India Forex Advisors.
The Indian stock market benchmark Sensex today softened by 38.40 points, snapping a two-day rally.