Moving in tandem with stocks, the rupee today erased initial losses and closed higher by 3 paise at 62.53 against the dollar.
Dealers in foreign exchange said late dollar selling by exporters and some banks aided the rupee rally for the second day in a row.
Dollar doing better in the overseas markets and sustained capital outflows restricted the rupee rise, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced weak at 62.81 a dollar from last close of 62.56 and immediately touched a low of 62.83 due to sluggish local stocks and persistent selling by foreign funds.
The local currency later bounced back to a high of 62.50 in tune with rise in local equities and dollar selling by exporters. It concluded the day at 62.53, a net rise of three paise.