trading slightly better at 54.06 per dollar from last close of 54.09 and immediately touched a low of 54.07 at the Interbank Foreign Exchange (Forex) Market.
Later, it bounced back on smart rise in local stocks to a high of 53.63 before losing some ground to end at 53.86, a rise of 23 paise, or 0.43 per cent.
forex dealers said a smart rebound in local equities and sustained fund inflows amid a weakness in the us currency overseas also aided the rupee.
"Rupee gained in line with the gains in local equities. The Economic Survey calling for fiscal consolidation paves way for interest rate cut by RBI which will be good for the industry and indicates the Budget tomorrow to be fiscally disciplined," said N S Venkatesh, Head (Treasury), IDBI Bank.
"Also, euro strengthening against the dollar and dovish comments by US Federal Reserve's Ben Bernanke hinting at improved liquidity in the American system, which in turn will bring more funds into India aided the rupee," he added.
Meanwhile, the BSE benchmark Sensex today recovered by 137.27 points to 19,152.41. Foreign institutional investors lapped up Indian stocks worth nearly $20 million (Rs 106.36 crore), according to BSE provisional data.
Dhanlaxmi Bank Executive Vice-President (Treasury) Srinivasa Raghavan said: "The Survey was practically fine. It hinted at steps for containing fiscal deficit in tomorrow's Budget, which is likely to pep rupee to up to 53.50."
Economic Survey for 2012-13 suggested projected an optimistic 6.1 to 6.7 per cent growth in the next fiscal and made a strong call for cutting subsidises. Referring to the movement of rupee, the Survey said, the rupee has been volatile in the range of 53.02-54.78 against the dollar.
In order to meet the challenges of the economy, the Survey prescribed shifting national spending from consumption to investment, removing the bottlenecks to investment, growth and job creation, besides making efforts to reduce cost of funds.
The dollar index, consisting of six major global rivals, was down by 0.2 per cent after allaying some fears over the Italian elections and the US Federal Reserve Chairman Bernanke statement to back the central bank's asset-purchase programme.
"The rupee traded on a firm bias for the entire session specifically in the second half. The rise in rupee was largely on the back of sharp rally in risky assets," said Pramit Prahmbhatt, CEO, Alpari Financial Services (India).
Abhishek Goenka, Founder and CEO, India Forex Advisors, said: "The rupee was seen appreciating today against the US dollar as there were positive sentiments in the market ahead of the budget... the appreciation in rupee is likely to be limited with an overall weaker outlook."
The premium for the forward dollar remained weak on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in July softened to 166-168 paise from Tuesday's close of 167-169 paise and far-forward contracts maturing in January also eased to 329-331 paise from 330-332 paise.
The RBI fixed the reference rate for the US dollar at 53.8350 and for euro at 70.3855.
The rupee recouped against the pound sterling to 81.58 from last close of 81.86 and also edged up against the Japanese yen to 58.79 per 100 yen from 58.83. It, however, improved further against the euro to 70.53 from previous close of 70.73.