The rupee appreciated by 4 paise to close at 73.54 against the US dollar on Thursday, as sustained foreign fund inflows strengthened investor sentiment.
However, a strong dollar against major currencies overseas restricted the rupee's gain, forex dealers said.
At the interbank forex market, the rupee opened lower at 73.77 but pared all its losses to finally settle at 73.54, registering a rise of 4 paise.
During the session, the domestic unit witnessed an intra-day high of 73.53 and a low of 73.78 against the US dollar.
It had settled at 73.58 against the greenback in the previous session on Wednesday.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 2,108.48 crore on Wednesday, according to exchange data.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, surged 0.13 per cent to 92.73.
On the domestic equity market front, BSE benchmark Sensex was trading 225.51 points lower at 40,481.80, and the broader NSE Nifty fell 66.20 points to 11,871.45.
Brent crude futures, the global oil benchmark, fell 0.46 per cent to $41.92 per barrel.
Deccan Herald is on WhatsApp Channels| Join now for Breaking News & Editor's Picks