The rupee wiped off its initial losses and was trading strong at 66.98 on heavy capital inflows into the domestic equity market.
But month-end demand for the American currency from importers and the dollar’s strength against some other currencies overseas restricted the rupee's gains.
The domestic unit opened weak by 6 paise at 67.08 against the previous close of 67.02 at the Interbank Foreign Exchange market today.
It hovered in a range of 67.08 and 66.96, before quoting at 66.98, up 10 paise at 4.40 pm local time.
Yesterday, the rupee had gained 16 paise to close at 67.02, its highest level in a month, on heavy selling of the greenback by exporters and banks.
Indian shares rose to their highest in more than a year on Wednesday on sustained foreign fund inflows and persistent buying by domestic financial institutions as well as retail investors.
The BSE index rose 109.16 points or 0.39 per cent to 28,452.17 after earlier hitting its highest since July 2015.
In the overseas market, the dollar rose to a one-month high against the yen on Wednesday as investors reversed the bets they had made on speculation that the US Federal Reserve would not hike interest rates anytime soon.