The rupee closed on Thursday at a near one-week high at 54.56 against the dollar amid capital inflows and dollar selling by exporters and banks.
After a weaker opening of 54.87 due to a stronger dollar, the Indian unit gained strength in the afternoon trades as the euro bounced back against the American currency. It had closed at 54.72 per dollar on Wednesday.
Intra-day, the unit touched a low of 54.91 on Thursday, before recovering to a high of 54.50 on heavy capital inflows into the domestic equity market. The BSE-benchmark Sensex closed higher by 160 points or 0.84 per cent at 19,413.
According to agency reports, dollar inflows were seen for Power Grid Corporation of India's bond issue as the power finance company plans to raise up to Rs 2,000 crore through a bond sale.
The rupee is likely to remain volatile with a downward pressure amid dollar demand from importers and expectations of a rate cut in the monetary policy review.
Call rates and G-Secs
The inter-bank call money rates closed marginally lower at 7.85 per cent from their previous close of 7.90 per cent. Intra-day, it moved in the 7.60 per cent to 8 per cent range.
The 8.15 per cent government security, which matures in 2022, ended almost flat at Rs 101.85 from a close of Rs 101.86, while the yields remained unchanged at 7.86 per cent from Wednesday.