The rupee had gained 28 paise against the American currency to settle at nearly two-month high at 66.74 in Monday's trade.
Forex dealers said strengthening of the euro against the dollar overseas and a higher opening in the domestic equity market also supported the local currency.
The rupee gained 28 paise on Thursday to close at 62.50.
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.
The Fed's decision on tapering its monthly $85 billion bond-buying programme is expected later on Wednesday.
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In the global market, the US dollar rose against the basket currencies in early trade as US President Barack Obama called for diplomacy in dealing with alleged chemical weapons attack in Syria but kept open the possibility of military action against the Assad regime.
The rupee resumed higher at 64.40 a dollar from Friday's close of 65.24 and touched a low of 64.54 at the interbank foreign exchange market.
A strengthening dollar overseas also kept the rupee under pressure amid demand from importers. Goldman Sachs followed JP Morgan, HSBC and Nomura in cutting India's economic growth forecast and also said it expects the rupee to touch 72 against the dollar in the next six months.
The local currency opened higher at 61.20 a dollar from the previous close of 61.30 at the Interbank Foreign Exchange Market.
A weak dollar overseas failed to restrict the rupee's decline, a forex dealer said.
The rupee is expected to remain under pressure in the near term, given the strengthening of the dollar against major global currencies and widening of the trade deficit.
Foreign institutional investors pulled out Rs 86.66 crore (Rs 866.6 million) from local stocks on Monday, as per provisional BSE data.
The Indian unit opened higher at 66.10 per dollar as against overnight level of 66.30 at the Interbank Foreign Exchange market and firmed up further to 66.04 on initial dollar selling.
The rupee had recovered by 8 paise to close at 66.91 in Tuesday's trade.
Domestic equity markets opened with losses which capped the rupee gains.
The dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up by 0.19 per cent at 95.48.
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.
The rupee gained for the second day, climbing 23 paise to a one-week high of 62.07 against the dollar on Wednesday, amid a modest recovery in local stocks and sales of the US currency by exporters and banks.
The rupee resumed marginally lower at 67.24 per dollar against Wednesday's closing level of 67.21.
Capital inflows continued to aid the rupee's rise, although a strong dollar overseas capped the gains.
Snapping its two-day gains, the rupee on Monday declined by 48 paise to settle at nearly four-week low of 62.17 against the US currency.
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The rupee gained 8 paise to close at over two-week high of 61.23 against the US dollar in the previous session.
The rupee added another 8 paise to end at 61.23 against the dollar, the highest level in more than two weeks, as the US currency traded stable ahead of the outcome of Federal Reserve's meeting today and as domestic shares surged to a record.
The Indian rupee on Tuesday ended marginally higher against the American currency at 61.41 amid volatile trading on the back of a higher dollar overseas.
The local currency recovered some ground after the Reserve Bank of India (RBI) was said to have stepped in through state-run banks, helping the rupee to end at 64.30, a fall of 110 paise or 1.74 per cent.
Dealers attributed the rupee's fall to fresh demand for USD.
The rupee has depreciated by about 25 per cent in the past three months, from close to Rs 83 in mid-May, while it was even higher at about Rs 80 against the British Pound in March.
Weakness in the dollar against some currencies supported the rupee.
The rupee extended gains for the second straight session against the US currency by firming up 21 paise to close at 64.82 a dollar.
The rupee recovered 14 paise to 66.40 against the dollar in early trade on Monday.
A weakening dollar against other currencies overseas supported the rupee.
A massive outflows of foreign funds on the back of stricter participatory notes and renewed possibility of Fed lifting US interest rates largely impacted the domestic unit.
Healthy demand for the American unit from importers and corporate weighed on the rupee
The rupee has dropped by 21 paise or 0.32 per cent in the last two sessions.
Forex dealers said dollar's weakness against other currencies overseas supported the rupee.
The dollar maintained its bullish momentum in Asian and early European trade
Sluggish domestic equities and persistent capital outflows largely pressurised the Indian unit
Forex dealers said weakness in local equities cast a shadow on the rupee. Dollar losing in overseas markets didn't impact the fall of the local currency, they added.
The rupee slipped from its initial gains by 5 paise against the US currency to 67.89 in late morning deals on bouts of dollar demand from importers.
The rupee had dropped by 60 paise or 0.89 per cent in previous three trading days.
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