It recovered to 62.04 per dollar before ending at 62.05, a gain of 31 paise or 0.50 per cent. The rupee is at the highest level since it ended at 61.62 on November 5.
The rupee traded strong against the dollar due to inflows from foreign banks, which may be partially tied to Power Grid share sale inflows, said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).
The follow-on-public offer of Power Grid Corporation was fully subscribed on the second day today. The issue is open till tomorrow for institutional buyers and it will close a day later for retail investors.
The rupee gained even as the dollar rose against major currencies today on expectations that key economic data from the US this week could increase pressure on the Federal Reserve to taper its bond-buying programme.
The November labour report from the US, due on Friday, is a key indicator to gauge the recovery in the US economy. A stronger economy may lead to the Federal Reserve tapering its USD 85 billion a month economic stimulus.
The benchmark 30-share Sensex tumbled 146.21 points or 0.7 per cent to 20,708.71. Overseas investors bought a net Rs. 516.59 crore of shares yesterday, according to provisional figures from the stock exchanges.