Strengthening of euro against the dollar in overseas market and a higher opening in the equity market supported the rupee.
The dollar index was up by 0.04 per cent against a basket of six major global rivals.
Forex dealers say dollar rose against the euro after the European Union cut its economic growth forecast.
With Indian stocks under pressure, the rupee tumbled to a low of 54.89 on emergence of dollar demand from importers and some banks on expectations of further rise in dollar overseas.
Foreign institutional investors sold domestic shares worth USD 8.36 million (Rs 45.41 crore), according to provisional BSE data.
Dealers said besides higher opening in local equities and selling of the US currency by exporters, euro's gains against the American currency on positive developments in Greece supported the rupee.
Sustained dollar sales by exporters and banks on behalf of their clients also boosted rupee sentiment even as the dollar index was marginally up in overseas markets, said traders.
Forex dealers said continued capital inflows and a weak dollar overseas also supported the local currency.
Foreign institutional investors had pumped in $132.5 million (Rs 717.89 crore), according to provisional BSE data.
The dollar index was down by 0.03 per cent against a basket of six major rivals as Euro rose against the dollar after the Cyprus reached bailout agreement.
The dollar index was down by 0.16 per cent against its six major global rivals.
Bearish domestic equities restricted the rupee rise.
The local currency had lost 16 paise to close at 54.17 on Monday due to fresh dollar demand from importers and some banks.
Fresh dollar demand from importers and some banks on the back of smart rise in the US dollar ahead of RBI monetary policy meeting on Tuesday also weighed on the rupee, said forex dealers.
The rupee had gained 14 paise to close at 52.87 on Tuesday on fresh dollar selling by exporters on the back of sluggish movements of the US currency overseas.
The rupee on Wednesday gained 14 paise to 54.04 against the dollar in early trade at the Interbank Foreign Exchange on sustained selling of the US currency by exporters and banks.
The dollar index recovered its early losses and was trading up by 0.11 per cent against a basket of six major rivals.
The rupee fell back sharply against the pound sterling at 83.28 from Monday's close of 82.49 and also reacted downwards against the euro to 71.59 from 71.29.
Strength in the dollar against some other currencies overseas weighed on the rupee but a higher opening in the domestic equities cushioned the impact
The rupee had lost 23 paise to end at 54.09 in Tuesday's trade due to month-end dollar demand.
The rupee had gained 49 paise yesterday to close at over 4-1/2-month high of 53.02 against the dollar on heavy selling of the American currency by exporters and some banks.
Forex dealers said euro's gains against the American currency in the overseas market also supported the rupee.
The rupee resumed lower at 54.37 per dollar as against the last closing level of 54.07 at the Interbank Foreign Exchange Market.
Forex dealers said euro's gains against the American currency in the overseas market also supported the rupee.
The rupee resumed lower at 54.43 per dollar as against the last weekend's level of 54.22 at the Interbank Foreign Exchange market.
Dealers said the country's trade balance numbers were inline with expectations as India's exports rose an annual 0.8 per cent in January and imports for the month rose 6 per cent, leaving a trade deficit of $20 billion.
The rupee on Tuesday fell by 12 paise to 53.97 against the dollar in early trade, extending losses for the fifth straight session at the Interbank Foreign Exchange (Forex) market due to sustained demand for the US currency from importers.
Strengthening of the euro against the US dollar overseas also supported the rupee.
Extending losses for the third straight session, the rupee today lost 28 paise to end at an over one-week low of 53.50, due to sustained dollar demand from importers amid sluggish local stocks.
Erasing early gains, the rupee on Thursday closed six paise lower at 53.22 due to sustained dollar demand after government estimates pegged ongoing fiscal's GDP growth at a decade low of five per cent.
Sustained foreign funds did manage to arrest the fall to some extent.
Forex dealers said sustained foreign fund flows also aided the trading sentiment in rupee's favour.
Dollar selling by exporters and banks also supported the rupee, forex dealers said.
The rupee resumed higher at 53.26 per dollar.
Increased demand for the US currency from importers put pressure on the rupee.
Weak dollar in the overseas market also boosted the rupee value against the dollar, a forex dealer said.
The rupee had gained 5 paise to end at 55.62 against the dollar on selling of the American currency by exporters in Wednesday's session.
Forex dealers said euro's gain against the US dollar supported the rupee, but month-end dollar demand from oil importers and a weak opening in the equity market restricted the gains.
Forex dealers said slight weakness in dollar overseas capped the rupee's losses to some extent.
This is the second biggest rise since September 21 last year, when rupee had gained by 93 paise, or 1.71 per cent.
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