The rupee had fallen to 61.92 levels intra-day but positive cues from local equities and sustained capital inflows helped it to cut losses, forex dealers said.
There was caution in the foreign exchange market ahead of quarterly GDP data release tomorrow and the RBI's monetary policy review next week, they added.
At the Interbank Forex market, the domestic currency resumed better at 61.81 a dollar from last close of 61.84.
Later, it was trapped in a narrow range of 61.80 and 61.9225 before concluding at 61.87, a fall of three paise or 0.05 per cent.
In the previous two days, it had risen by ten paise or 0.16 per cent while trading in a tight range.
The Indian benchmark S&P BSE Sensex today rose by 52.72 points, or 0.19 per cent. FPIs/FIIs bought shares worth $35.65 mln yesterday, as per Sebi data.
The dollar index was up by 0.20 per cent against its major six global rivals.
Pramit Brahmbhatt, CEO, Veracity Group said: "Not much movement was seen in the USD/INR pair.
The pair is likely to trade range bound as investors are trading cautiously and are waiting for the credit policy due next month, which will help them to gauge the markets." The trading range for the spot USD/INR pair is expected to be within 61.50 to 62.40, he added.