The rupee on Tuesday gained three paise to close at 54.26 against the dollar in line with strong local equities amid some selling of the US currency by exporters.
However, foreign investors pulling out funds from domestic stocks and a firm dollar overseas capped rupee's gain's to some extent, forex dealers said.
The local unit commenced a tad lower at 54.30 from Thursday's close of 54.29 at the Interbank Foreign Exchange market.
The rupee moved in a range of 54.24-54.36 before settling at 54.26, a rise of three paise.
The Forex market was closed on March 29 and April 1 for 'Good Friday' and
annual closing, respectively.
Foreign institutional investors sold domestic shares worth USD 8.36 million (Rs 45.41 crore), according to provisional BSE data.
"Since past few sessions, we have been witnessing a very thin range in rupee as there are mixed signals coming from local and global front. Locally, our current account deficit for December quarter disappointed as it rose by 6.7 per cent to $32 billion," said Abhishek Goenka, Founder and CEO, India Forex Advisors.
"Going ahead, we expect this week to be volatile, as major central banks will be announcing their respective monetary policies," he added.
The dollar index was trading up by 0.04 per cent against a basket of six major global rivals.
