Snapping its two-day losing streak, the rupee on Monday ended higher by 21 paise to 66.33 on fresh selling of dollars by banks and exporters driven by lower greenback overseas amid signs of strength in domestic macroeconomic indicators such as inflation figures.
Hopes of resumption in foreign capital inflows in view of sharp recovery in equity market also boosted the rupee's value against the dollar, a forex dealer said.
Deflationary trend continued for 10th month in a row with WPI inflation plunging to a historic low of (-)4.95% in August on cheaper commodities, a development that may prompt the RBI to cut rates later this month.
While the retail inflation in August was down at 3.66% as against 3.69% for the month of July.
The domestic unit resumed higher at 66.40 per dollar as against last Friday's closing level of 66.54 at the Interbank Foreign Exchange market.
It hovered in a range of 66.49 and 66.30 during the day before ending at 66.33 per dollar, showing a gain of 21 paise or 0.32%.
It had dropped by 13 paise or 0.19% in previous two days.
The dollar index was up by 0.18% against a basket of six currencies in the later afternoon trade.
However, in Tokyo market, the US dollar was lower against the yen and euro in Asian trade on Monday, with investors keeping a close eye on the policy meeting of the Federal Reserve and the Bank of Japan later this week.
Meanwhile, the Indian benchmark sensex ended higher by 246.49 points or 0.96%.
In forward market on Monday, premium for dollar declined further on persistent receivings from exporters.
The benchmark six-month premium payable in February declined to 193-195 paise from the last weekend's level of 195.5-197.5 paise and far forward August 2016 also fell to 405-407 paise from 406.5-408 paise.
The RBI fixed the reference rate for the dollar at 66.3708 and for the euro at 75.3242.
The rupee also recovered against the pound sterling to close at 102.24 as against the last Friday's level of 102.59 and while moved down further against the euro to 75.11 from 74.93.
However, it ruled steady against the Japanese currency at 55.14 per 100 yen.