The rupee strengthened by 14 paise to close at 66.41 against the US dollar on Wednesday after persistent selling pressure from banks and exporters and amid hopes of resumption of foreign capital inflows in equity markets.
The domestic unit resumed sharply higher at 66.38 against Tuesday's level of 66.55 at the Interbank Foreign Exchange (Forex) market.
It hovered in a range of 66.24 to 66.46 during the day before finishing at 66.41, showing a gain of 14 paise, or 0.21%.
The domestic currency has gained 41 paise, or 0.62%, in last two trading sessions. In the global market, the dollar index was up by 0.41% against a basket of six currencies.
Oil prices edged higher in Asian trade as dealers set aside weak Chinese trade data and look ahead to the release of a US stockpiles report, analysts said.
The euro strengthened against the dollar on Tuesday after strong readings on trade and economic growth in the Eurozone helped support the shared currency.
The euro benefited from second-quarter economic growth in the Eurozone, which was revised higher to 0.4%, while trade data showed July was a good month for German exporters.
Meanwhile, the benchmark BSE Sensex rose further by 401.71 points, or 1.59%, to settle at 25,719.58.