Forex dealers said besides a lower opening in the domestic equity market on fears of a rate hike by the Reserve Bank, higher demand for the American currency from importers put pressure on the rupee but dollar's weakness against other currencies overseas, capped the fall.

The country's merchandise deficit narrowed to $9.2 billion in November, but exports growth eased to 5.9 percent from 13.5 percent in October, government data showed.

The rupee resumed higher at 61.75 as against the last closing level of 62.05 per dollar at the Interbank Foreign Exchange (Forex) Market and firmed up further to a one-month high of 61.53 before quoting at 61.59 per dollar at 1045 hours.

The gains in the rupee masked a rising sense of caution across markets ahead of the results of elections in several states. Delhi was the latest to hold assembly elections on Wednesday.

The deficit data was the latest in a run of positive signs for the sluggish domestic economy and could put India in a better position should the Fed start tapering, than in the summer when the rupee hit a record low.

The rupee was last at 62.05/06 after gaining to as high 61.9650 against the dollar, its highest since Nov 19. It had closed at 62.44/45 on Friday.

However, dealers said that most of the rupee's gains were lost on consistent dollar demand from state-run oil refiners and other importers.

The gains will provide a much-needed reprieve after the rupee fell for a fifth week and hit an over two-month low last week in trade.

Reserve Bank of India Governor Raghuram Rajan, in a hurriedly called press conference, said that the central bank has now routed back most of the dollar demand from oil companies to the market.