The rupee appreciated by 6 paise to close at 73.11 (provisional) against the US dollar on Wednesday, supported by sustained foreign fund inflows and weaker American currency against key rivals.
At the interbank forex market, the domestic unit opened at 73.16 against the US dollar and witnessed an intra-day high of 73.05 and a low of 73.19.
The local unit finally settled at 73.11, registering a rise of 6 paise over its previous close.
On Tuesday, the rupee had fallen 15 paise to settle at 73.17 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.15% to 89.30.
"Indian rupee appreciated amid weakness in dollar and steady FII inflows. Dollar weakened on prospect of the Democrats winning both the seats at Senate runoff election in Georgia. If Democrats win both seats it would be easier for elected President Joe Biden to pass new legislation," said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
Additionally, markets expect Democrat-led government may add more fiscal stimulus, Mukadam said.
Furthermore, Nikkei Services PMI data showed activity in sector expanded for three consecutive months. However, sharp gains were prevented on surge in crude oil prices and as stocks markets slipped into red, he noted.
On the domestic equity market front, the BSE Sensex ended 263.72 points or 0.54% lower at 48,174.06, while the broader NSE Nifty declined 53.25 points or 0.38% to 14,146.25.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 986.30 crore on a net basis on Tuesday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, advanced 54.08% to USD 0.90 per barrel.