Dollar's losses versus other Asian currencies also supported the local unit.
At the Interbank Foreign Exchange (Forex) market, the local currency rose 17 paise to 46.14 a dollar, its highest since November 26. The rupee had closed 20 paise up at 46.31/32 in the previous session after the BSE benchmark Sensex recorded sharp gains.
Forex dealers said expectations of increased capital inflows into domestic equities by foreign funds bolstered rupee sentiment.
Further, dollar's weakness against other Asian currencies, continued to support the domestic unit, they added.
The benchmark Sensex had gained 272.05 points, or 1.61 per cent in yesterday's trade.
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