The rupee resumed higher at Rs 45.95/96 per dollar on the Interbank Foreign Exchange, as against its previous close of Rs 46.06/07 per dollar, and moved up further to Rs 45.90 per dollar before quoting at Rs 46.01/02 per dollar at 1030 hours.
The domestic currency moved in a range between Rs 45.90 and Rs 46.05 per dollar in morning deals. Banks and exporters preferred to reduce their dollar holdings amid weakness of the greenback in overseas markets, a forex dealer said.
A firming trend in the equity market also boosted the rupee sentiment, he added. The Indian benchmark Sensex shot up by 147 points, or 0.89 per cent, in early trade today.
In New York, the dollar weakened yesterday after upbeat US economic data boosted investors'' appetite for assets deemed riskier, like stocks.
The US dollar extended its decline after Federal Reserve Chairman Ben Bernanke last week signalled no need for an immediate round of additional stimulus for the American economy, though the option has been left open.