The rupee ended at a 17-month closing high on Monday, helped by strong corporate inflows, but the Reserve Bank of India's steady dollar purchases checked its gains, dealers said.
The local currency ended at 47.6875/6975 per dollar, up from Friday's close of 47.7000/7025.
"Had it not been for central bank's bids at 47.6825, we could have seen the rupee appreciating further," said a dealer at a state-run bank.
"The robust inflows took care of purchases by an oil exploration firm."
Despite regular central bank dollar purchases, the rupee has gained 0.6 per cent since the start of 2003 and 2.9 per cent from its life low of 49.08 hit in mid-May.
It is still undervalued by four per cent on a trade-weighted basis, indicating a further upside, analysts said.
But traders said that they were watching prices of crude oil, India's single largest import item, which remained firm in Europe.
Brent crude for March was up 18 cents a barrel at $32.52 while US light crude was up nine cents at $35.21 a barrel, just shy of a 26-month peak of $35.25 reached in New York on Friday.
Worries that war in Iraq could disrupt crude supplies from the Middle East has underpinned a rally that has seen oil prices rise more than 10 per cent this year.
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