In New York, the dollar fell against the British pound on Wednesday after the Bank of England raised its projections for UK growth in 2014. However, analysts warned that gains against the dollar could be limited.
Domestic shares and other global markets rose on upbeat trade data from China earlier in the day and after a US House deal extending the federal borrowing authority.
The partially convertible rupee ended at 62.2825/2925 per dollar.
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The rupee has avoided the heavy losses suffered by some emerging Asian currencies such as the Philippine peso this year because of its efforts to narrow the current account deficit, and strong foreign investor inflows.
The cost of holding one-year forward dollars rose to 482.75 basis points from 472.75 bps on Tuesday.
The rupee was largely rangebound for most of the trading day in the absence of any major cues ahead of the Reserve Bank of India's rate-setting meeting next week.
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In New York, the US dollar gained against most rivals on last Friday, as a week of data reassured investors that December's dismal employment report wasn't indicative of a broader shift in the economy.
In New York, the dollar edged down against the yen for the first time in three sessions as investors weighed economic data and remarks from outgoing Federal Reserve Chairman Ben Bernanke.
The partially convertible rupee closed at 61.5350/5450 per dollar compared to 61.54/55 on Wednesday.
The headline inflation eased to a five-month low in December on lower vegetable prices, providing some relief to the ruling coalition before a national election and increasing the odds that interest rates will stay on hold this month.
Foreign fund flows into and out of the domestic sharemarket will continue to be key for the rupee's fortunes.
India is due to post industrial output later in the day, with analysts expecting a return to modest growth, and is due to post wholesale and consumer prices data next week amid expectations vegetable prices have eased.
A fall in blue-chips such as Larsen and Toubro on anxiety ahead of the quarterly earnings season and inflation data hurt local shares.
The rupee has fallen 0.8 per cent so far this year, hitting a one-month low on Friday, hurt by a stronger dollar globally as well as caution ahead of key economic data this month.
New York's main contract, West Texas Intermediate for February delivery, was up 22 cents at USD 98.64 in mid-morning trade while Brent North Sea crude for February rose 17 cents to $ 110.97.
It fell 11 per cent in 2013, its third successive annual loss.
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Traders say the outlook for the rupee has improved on the back of a sharp narrowing in the current account deficit after government and central bank emergency measures such as curbing gold imports.
The partially convertible rupee closed at 62.16/17 per dollar compared to 61.79/80 on Tuesday. Financial markets were closed on Wednesday for Christmas.
The partially convertible rupee closed at 61.79/80 per dollar on Tuesday compared with 61.9525/9625 on Monday. The unit rose to 61.78 during the session, its highest since December 18.
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The rupee resumed slightly lower at 62.05 per dollar as against the last weekend's level of 62.04 at the Interbank Foreign Exchange market. It recovered to 61.88 per dollar before quoting 61.93 at 1045 hours.
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