The rupee rose by 15 paise to end at 66.32 against the US dollar on fresh selling of the American currency by banks and exporters on the back of lower greenback in overseas markets.
The local currency opened higher at 66.37 as against Monday’s level of 66.47 at the Interbank Foreign Exchange (Forex) market and firmed up further to 66.31 before ending at 66.32, showing a gain of 15 paise or 0.23%.
The rupee had dropped by 29 paise, or 0.44%, in the previous two days.
It hovered in a range of 66.47 to 66.31 during the day.
The dollar index was trading lower by 0.19% against a basket of six currencies in late afternoon trade.
In Asia, the dollar declined on Tuesday and weighed on uncertainty over the pace of anticipated US interest rate hike.
Following comments made by senior Federal Reserve officials indicating rate increases in December, market participants have largely factored in the December lift-off.
They also expect a few more increases next year.
However, in New York, the dollar rose to its highest level on Monday against the euro since mid-April, after hawkish comments from San Francisco Federal Reserve president John Williams over the weekend reiterated the case for raising interest rates in December.
Meanwhile, the benchmark BSE Sensex declined by 43.60 points, or 0.17%, to settle at 25,775.74.