The rupee trimmed its initial gains against the American currency but was still quoted up by two paise to 54.49 per dollar on mild selling of dollars by banks and exporters on the back of lower dollar overseas.
The rupee resumed higher at 54.41 per dollar against the Wednesday's closing level of 54.51 per dollar at the Interbank Foreign Exchange (Forex) Market and hovered in a range of 54.39 per dollar and 54.53 per dollar before quoting at 54.49 per dollar per dollar at 1040 hrs.
Banks and exporters preferred to reduce their dollar position due to weakness of dollar in the overseas market, a forex dealer said.
In Los Angeles, the US dollar slipped against Japan's currency in the early trade, with a break above the yen 100 level proving elusive for the greenback.
The dollar bought 99.58 yen in Asian trading hours, down from 99.73 yen late in Thursday's North American session.
Meanwhile, the Indian benchmark Sensex dropped by 274 points, or 1.48%, to 18,267.95 in the late morning trade.