The rupee appreciated by 15 paise to 82.70 against the US dollar on Wednesday, supported by foreign capital inflows.
A strong dollar against major rivals overseas and weak domestic equities weighed on the local unit and capped the appreciating bias, forex traders said.
At the interbank foreign exchange market, the local unit opened at 82.83 against the US dollar and settled at 82.70, higher by 15 paise over its previous close.
During the day, the domestic unit witnessed an intra-day high of 82.64 and a low of 82.84 in the day trade.
On Tuesday, the rupee closed at 82.85 against the US currency.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.18 per cent to 103.67.
Global oil benchmark, Brent crude futures, advanced 1.81 per cent to $78.23 per barrel.
The rupee gained on the soft dollar and FII inflows, said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.
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The US Dollar gained on Wednesday's safe-haven appeal as the debt ceiling impasse continues, keeping the markets nervous. Mixed to positive economic data from the US also supported the greenback, Choudhary said.
"We expect the rupee to trade with a negative bias on risk aversion in global markets and a surge in crude oil prices. Deadlock over the debt ceiling talks has deteriorated global risk sentiments.
"However, FII inflows may support the rupee at lower levels. Traders may remain cautious ahead of FOMC minutes for cues on Fed’s policy meeting in June. We expect the USD/INR spot to trade between 82.30 to 83.30 in the near term," Choudhary added.
On the domestic equity market front, the 30-share BSE Sensex declined 208.01 points or 0.34 per cent to end at 61,773.78 points, and the broader NSE Nifty fell 62.60 points or 0.34 per cent to 18,285.40 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital market on Tuesday as they purchased shares worth ₹182.51 crore, according to exchange data.