The local currency recovered to 62.31 as banks sold dollars and ended at 62.44, a gain of 31 paise or 0.49%. In the previous three trading sessions, the rupee had tumbled 98 paise.
"On account of half-yearly closing, there is a possibility that corporates, mainly IT exporters, might have sold dollars in the markets. This has helped the rupee to gain against the US dollar," said Abhishek Goenka, CEO of India Forex Advisors.
In London, the euro rose against most major currencies on Wednesday as solid German consumer-confidence data offset worries about the European Central Bank's monetary policy.
In New York, the dollar gained yesterday as investors examined economic data and speeches from Federal Reserve officials for insight into when the central bank could begin to slow its monthly asset purchases.
Meanwhile, crude oil prices rose in Asia as investors expected a report to show US stockpiles fell, indicating firm demand in the world's top crude consumer, analysts said.
The 30-share benchmark BSE Sensex fell 64 points to 19,856.24 on Wednesday.