In line with stock markets, the rupee ended higher by 6 paise at 60.07 against the dollar on fresh selling of the American currency by banks and exporters in view of strong capital inflows.
The rupee resumed higher at 59.98 per dollar as against the last closing level of 60.13 at the Interbank Foreign Exchange (Forex) Market.
After moving in a narrow range, it settled at 60.07, a gain of 6 paise from its previous close.
Pramit Brahmbhatt, Veracity Group CEO, said: "Today, the rupee appreciated as corporates were seen selling dollars.
Exporters too were seen selling dollars at higher levels, but the dollar demand from oil importers capped the rupee gain.
Dollar index is also trading weak which helped Rupee futures to appreciate almost quarter per cent." The BSE benchmark Sensex today ended 20 points higher at 22,344.04 after paring initial gains in volatile trade.
Meanwhile, Finance Minister P Chidambaram in New Delhi said the rupee at a level of 60 to a dollar is an "accurate" valuation of the domestic currency. He said the value of the rupee is determined by the market.
"The correct measure is the REER (real effective exchange rate). As long as the REER is around 100, that reflects more or less the correct value of a currency.
"We think that rupee at about 60 to a dollar, given the REER, is more or less an accurate reflection of the true value of the currency," he said.
In London, the euro rose against the dollar even as investors awaited European Central Bank President Mario Draghi's comments on persistently low inflation and the potential for more easing.
The benchmark six-month premium payable in October settled at 224.5-226.5 paise as against 223.5-225.5 paise previously.
Far forward contracts maturing in April, 2015 ended at 457-459 paise as against 450.5-452.5 paise previously.
The Reserve Bank of India fixed the reference rate for dollar at 59.9913 and for the euro at 83.48 83.48.
The rupee recovered against the pound to 101.91 from 102.05 previously and also bounced back against the Japanese Yen to 59.04 per 100 yen from 59.14.
It, however remained firm against the euro at 83.70 from last close of 83.75.