The rupee appreciated by 8 paise to close at 82.76 (provisional) against the US currency on Thursday following a weak greenback in overseas markets.
Losses in domestic stocks and firm crude oil prices, however, restricted the rupee's gain, forex dealers said.
The local currency opened higher at 82.78 at the interbank foreign exchange market after overnight losses in the greenback on improved risk sentiment.
The rupee moved in the range from 82.64 to 82.79 in the day trade before settling at 82.76 to a dollar, showing gains of 8 paise over the previous close.
The rupee had weakened by 14 paise to settle at 82.84 on Wednesday. Investor sentiment improved after a report showed that the US consumer confidence is holding up despite the Federal Reserve's campaign to fight inflation by raising interest rates.
The Conference Board's consumer confidence index rose to 108.3 in December - highest level since April - from 101.4 in November.
The dollar index, which gauges the greenback's strength against a basket of six currencies, dropped 0.32 per cent to 103.898.
Brent crude, the pricing basis for international trading, strengthened 1.58 per cent to USD 83.50 a barrel as US inventory data showed the Strategic Petroleum Reserve falling to 378.6 million barrels, its lowest level since 1983.
Meanwhile, benchmark BSE Sensex declined 241.02 points to end at 60,826.22 while Nifty fell 71.75 points to 18,127.35.
Foreign institutional investors (FIIs) turned net sellers in the capital markets on Wednesday as they sold shares worth Rs 1,119 crore, according to exchange data.
(To receive our E-paper on WhatsApp daily, please click here. To receive it on Telegram, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)
