The Indian rupee appreciated for the second day in a row and ended 13 paise higher at 60.92 against the Greenback following sustained dollar selling by exporters ahead of a decision on US interest rates by Federal Reserve.
A weak dollar overseas also aided the rupee rise while fresh sell-off by foreign funds in domestic stocks capped the currency's gains, forex dealers said.
Dealers added that they are awaiting the outcome of Federal Open Market Committee two-day policy meet, which began on Tuesday.
Consensus expectations are that Fed will keep interest rates low for a while.
At the Interbank Foreign Exchange market, the domestic currency commenced strong at 60.95 a dollar from last close of 61.05.
It moved in a narrow range between 60.8750 and 61.03 before settling at 60.92, showing a rise of 13 paise or 0.21
On Wednesday, it had gained 8 paise or 0.13 per cent.
For the seventh straight meeting, the Fed later tonight is expected to taper its bond buying program by $10 billion, bringing QE3 down to only $15 billion per month, experts said.
Meanwhile, the Indian equity benchmark S&P BSE Sensex on Wednesday recovered by 138.78 points, or 0.52 per cent, after two days of heavy fall.
FPIs/FIIs withdrew $120.70 million on Tuesday, as per Sebi data.
The dollar index was trading down by a mere 0.03 per cent against its major global rivals ahead of Fed outcome.
The Bank of England's Monetary Policy Committee voted 7-2 at its September meeting to keep rates on hold and its quantitative-easing program unchanged, according to minutes released on Wednesday.
