For the second consecutive session, the rupee strengthened against the dollar by rising 16 paise to 67.17 on sustained selling of the American currency amid a continued rally in domestic equities.
Fresh foreign fund inflows also weighed on the local currency.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced slightly better at 67.32 a dollar from Wednesday’s closing value of 67.33.
But, it trimmed initial gains and fell back on some dollar demand from banks and importers to touch an intra-day low of 67.39 during mid-morning deals.
However, overcoming the volatility, the rupee recovered smartly to touch a high of 67.14 on bouts of dollar selling from banks and exporters before ending at 67.17, revealing a good gain of 16 paise, or 0.24%.
After an uninterrupted nine-day slide, the domestic unit rebounded on Wednesday from its 2-1/2 month low with an impressive 42-paise gain - its sharpest single-day jump in over two months.
The renewed strength of dollar in the midst of an imminent Fed rate hike concerns is keeping emerging market currencies volatile, though rupee has shown more resilience as compared to its peers reflecting the fundamental conditions, a forex dollar commented.
Further gains will depend on foreign fund flows into equity markets and dollar movements, he added.
Meanwhile, the RBI fixed the reference rate for the dollar at 67.2855 and euro at 75.2185.
In cross-currency trades, the rupee firmed up further against the pound sterling to settle at 98.79 from 98.85 on Wednesday and also moved up against the yen to end at 61.06 per 100 yens compared to 61.13.
On the other hand, it weakened against the euro and finished at 75.10 from 75.03 earlier.