Paring early losses, the rupee today gained seven paise to close fiscal year 2012-13 at 54.29 against dollar on renewed selling of the US currency by exporters, amid a fag-end recovery in local equities.
Forex dealers said continued capital inflows and a weak dollar overseas also supported the local currency.
The rupee commenced lower at 54.47 against the dollar from its previous close of 54.36 on Tuesday at the Interbank Foreign Exchange market.
It eased further to a low of 54.48 on the back of weakness in stocks and sustained month-end dollar demand in morning deals.
Later, the rupee bounced back on smart recovery in local share markets to a high of 54.25 before settling at 54.29, a net rise of seven paise, or 0.13 per cent from its previous close.
The rupee has fallen over seven per cent this fiscal from 50.73 on April 3 last year, the first day of trade of 2012-13.
Foreign institutional investors bought Indian shares worth $105.7 million (Rs 573.87 crore) on Thursday, according to provisional BSE data.
"The rupee ended financial year on positive note. The week witnessed low volumes as there were only three working days.
"Global events were not seen putting a parallel impact on the rupee," India Forex Advisors founder and CEO Abhishek Goenka said.
The dollar index was down by 0.1 per cent against a basket of six major global rivals.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Today equity markets traded volatile as Thursday being the expiry of domestic derivatives.
"During the day it traded but managed to close up by over 0.7 per cent, which helped rupee to end strong."