The currency's relatively stable performance even as the US announced tapering showed India's better preparedness to deal with any fallout of such foreign fund outflows.
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Dealers cited some dollar selling by state-run banks in the session, which some said may be on behalf of the central bank.
The partially convertible rupee closed at 62.09/10 per dollar compared with Tuesday close of 62.01/02, a fifth day of losses out of six.
The RBI is widely expected to raise its key repo rate by 25 basis points to 8.00 per cent on Wednesday, its third such hike in four months after recent data showed both wholesale and retail inflation at multi-month highs.
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.
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RBI chief Raghuram Rajan said on Thursday he was 'very uncomfortable' with the inflation reading, a comment that probably seals the case for him to deliver his third rate increase next Wednesday, despite a weak economy.
In Singapore, oil prices eased in Asian trade today on a mixed US inventory report indicating tepid demand, while expectations of a return of Libyan supplies also weighed, analysts said.
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.
Traders are now focussed on the upcoming November trade data, due sometime this week, for near-term direction, with consumer inflation data due out on Thursday, which will help set expectations ahead of the Reserve Bank of India's policy review on December 18.
Traders said good dollar demand from importers including oil companies was seen at stronger rupee levels, limiting any further gains.
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.
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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.
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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.
The domestic currency resumed higher at 62.30 per dollar as against the last closing level of 62.41 at the Interbank Foreign Exchange Market and firmed up further to 62.20 a dollar.
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Most Asian currencies weakened versus the dollar with the Thai baht and Philipine peso sliding on disappointing economic data.
The concessional swap windows have attracted about $25 billion, RBI deputy governor HR Khan said on Monday.
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.
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