The rupee had gained 138 paise in opening trade to touch 65.69 level but lost momentum in late morning deals due to some dollar demand.
The domestic currency was still up by 62 paise at 66.45 a dollar against last closing level of 67.07 per dollar at the Interbank Foreign Exchange (Forex) Market.
Weakness in dollar in the overseas market and latest RBI measures to support the rupee boosted the value of domestic currency, a forex dealer said.
To support the rupee, new RBI governor R Rajan yesterday announced steps, such as liberalisation of the financial market by enhancing the limits for exporters to re-book cancelled forward exchange contracts and opening a special concessional window for swapping foreign currency non-resident (FCNR) deposits and dollar funds.
The rupee trimmed its early gains against the US dollar but was still up by 62p.
In New York market, the US dollar edged lower against some rivals yesterday as investors avoided big moves ahead of the European Central Bank meeting on Thursday and the US jobs report on Friday.
Meanwhile, the benchmark Sensex was trading higher by 428.13 points, or 2.31 per cent, at 18,995.68 points.