The Indian rupee bounced back by 18 paise and ended at 50.45/46 against the greenback as local stocks rallied strongly on increased capital inflows amid a weakening dollar overseas.
Dollar buying by oil companies, however, put pressure on the rupee.
The domestic currency moved in a limited range of 50.40 and 50.66 during the day after resuming stronger at 50.48/50 a dollar from its Friday's close of 50.63/64 a dollar.
Dealers at the foreign exchange market said the rupee drew support from hopes of revival in portfolio inflows into equity as local stocks surged by a whopping 5.10 per cent on Monday.
Foreign institutional investors bought shares worth more than $350 million in the first four days of last week.
They said oil refiners' purchase of dollars for the month-end import payments exerted pressure on the rupee.
The Indian benchmark Sensex rose by a hefty 457 points while Asian indices too were up by 2-5 per cent.
Global oil prices firmed up in Asian trade today, driven by optimism in the financial markets ahead of an expected US government announcement of a plan to sell toxic assets.