Also, continuing rise in local equities and sustained inflows by FPIs/FIIs helped the rupee to strengthen, brokers said.

At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced better at 60.64 a dollar from previous close of 60.68 and immediately touched a low of 60.69.

Later, it gradually bounced back to a one-month high of 60.33 before surrending some of its gains to settle at 60.49, a rise of 19 paise or 0.31 percent. In the past four trading days, rupee had dipped by 25 paise or 0.41 percent.

"The Indian rupee was seen appreciating against US dollar today. The volatility in the market suddenly increased after the news that Ukraine and Russia have agreed for a permanent ceasefire in Donbass region. Easing geopolitical tensions globally have reduced pressure on Indian rupee. On the domestic front, Indian stock markets continued to attract foreign flows. Overall Indian rupee made a low of 60.68 and a high of 60.34 before closing the session at 60.49 levels," India Forex said in a note.

The benchmark S&P BSE Sensex extended its rally for the ninth straight session and ended higher by 120.55 points at 27,139.94.

FPIs/FIIs injected USD 144.05 million on Tuesday, as per Sebi data.

The dollar index, which was up at over 83 to 52-high, was trading down by 0.12 against six rival currencies.

Pramit Brahmbhatt, Veracity Group CEO said, "Today rupee appreciated over quarter percent as local equities continued its bull run, closing at all time high. Also the Japanese banks were seen selling dollars, helped rupee to appreciate further. Dollar index is trading weak for the day which further aided rupee's rise."

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