The rupee appreciated 3 paise to close at 83.60 (provisional) against the US dollar on Wednesday, tracking a positive trend in domestic equities and a weak greenback against major currencies overseas.
However, net foreign fund outflows capped sharp gains in the local unit, forex traders said.
At the interbank foreign exchange, the local unit opened slightly strong at 83.59 against the American currency. During the session, it surged 12 paise to touch 83.51.
However, the domestic currency gave up most of its gains to settle at 83.60 (provisional), 3 paise higher than its previous close.
On Tuesday, the rupee fell 9 paise to close at 83.63 against the American currency.
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"This strength is likely supported by a weak dollar index and continued positive sentiment in Indian markets," Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said.
On the domestic equity markets front, the Sensex climbed 255.83 points to settle at an all-time high of 85,169.87, while Nifty rallied 63.75 points to hit a record of 26,004.15.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose marginally by 0.05 per cent to 100.52.
Brent crude, the international benchmark, was down 0.25 per cent at 74.98 in futures trade.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, offloading shares worth Rs 2,784.14 crore, according to exchange data.
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Meanwhile, the Asian Development Bank (ADB) on Wednesday retained India's growth forecast for the current fiscal at 7 per cent and said that the economy is likely to accelerate in the coming quarters on improved farm output and higher Government spending.
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