A weak dollar in overseas markets largely supported the upmove despite a sell-off in local stocks.
Strong capital inflows to equity and debt markets also provided support, forex traders said.
The greenback was broadly lower through the Asian session spooked by overnight comments from the Chicago Federal Reserve President Charles Evans that the Fed was in no rush to raise interest rates again and may wait until at least June before deciding on another hike.
The home currency opened modestly lower at 65.40 from Monday's closing of 65.36 at the Interbank Foreign Exchange (forex) market and weakened further to 65.4450 due to fresh dollar purchases by importers.
However, selling of dollars by banks and some exporters helped the local unit to clock a smart recovery in late afternoon deals to hit a fresh intra-day high of 65.21 before ending at 65.30, revealing a rise of 6 paise, or 0.09 per cent. Today's closing is nearly 17-month high for the domestic currency, which had ended at 65.27 on October 30, 2015.
Yesterday, the rupee had closed 10 paise higher against the greenback.
The RBI, meanwhile fixed the reference rate for the dollar at 65.3117 and for the euro at 70.2950.
The US dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, dipped below the 100 mark for the first time since early February to trade sharply lower at 99.70.
In cross-currency trade, the rupee continued to drift against the British pound to end at 81.37 from 81.12 and remained subdued against the Japanese Yen and ended lower at 58.03 per 100 yens as compared to 57.91 yesterday. It also fell back against the euro to finish at 70.58 from 70.29 earlier.
Meanwhile, domestic equities remained under modest selling pressure for the second straight session following heavy unwinding in select pharma and banking stocks.
The flagship Sensex fell 33.29 points to end at 29,485.45, broader Nifty moved down 5.35 points to 9,121.50.
In the forward market, premium for dollar displayed a steady to firm trend in the absence of any market moving factors.
The benchmark six-month premium for August quoted steady at 143-145 paise, while the far-forward February 2018 contract inched up to 296-298 paise from 295-297 paise on Monday.
On the global commodity front, crude prices rebounded sharply on expectations that an OPEC-led output cut would be extended beyond June, though gains were pegged back by concerns about persistently high crude inventories.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)