A weak dollar overseas failed to restrict the rupee's decline, a forex dealer said.
However, FII outflows of Rs 545 crore (Rs 5.45 billion) capped the gains in the rupee, which had slumped by 126 paise in past two days.
The rupee on Thursday appreciated 20 paise to end at 62.37, its highest in two weeks, on positive trends in local equities and fresh dollar selling by exporters.
The local currency had lost 119 paise in the past five sessions on rising worries over current account gap and fears that withdrawal of US stimulus will hit inflows from overseas.
In dull trade, the rupee on Monday ended a mere two paise lower at 60.20 against the US dollar on weak local equities and imported-driven demand for the American currency.
The rupee on Tuesday gained 29 paise to close at seven-month high of 60.48 against the dollar on sustained selling of the US currency by exporters and banks.
However, the hefty initial gains of the rupee, which had jumped to 61.05 intra-day, were substantially erased on month-end demand for US dollars from private oil firms and some defence-related purchases, amid fall in domestic stocks.
Continuing its range-bound movement for the fourth session, the rupee today closed up by two paise at 59.25 ahead of industrial output and retail inflation data.
At the Interbank Foreign Exchange market, the domestic currency resumed stable at its overnight close of 60.07 a dollar and immediately touched a low of 60.09.
Capital inflows continued to aid the rupee's rise, although a strong dollar overseas capped the gains.
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Snapping a two-day fall, the rupee opened strong at 59.49 a dollar from the previous close of 59.76 at the Interbank Foreign Exchange Market and then touched a low of 59.59.
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Some analysts believe that markets are expected to remain unclear and would have to wait until tomorrow's US non-farm payrolls data.
After another day of volatile trade, the rupee today appreciated by seven paise to close at a new one-month high of 59.04 against the dollar as the RBI's liquidity-tightening measures continued to lend support.
The rupee on Wednesday snapped its two days of losses and edged up two paise to end at 59.27 against the dollar following late selling of the US currency by exporters.
Month end dollar demand from oil importers has forced rupee to trade weak.
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