The rupee regained strength to trade 46 paise higher at 59.93 against the dollar at the Interbank Foreign Exchange market on Thursday on increased selling of the US currency by exporters and banks.
Forex dealers said a higher opening in the domestic equity market and dollar's weakness against other currencies overseas after the US Federal Reserve kept its easing policy unchanged also supported the rupee.
The Fed on Wednesday said it would leave its benchmark interest rate unchanged but cut its monthly stimulus programme to US $35 billion from US $45 billion.
The rupee lost 36 paise to end at an over seven-week low of 60.39 against the dollar on Wednesday as growing unrest in Iraq pushed up crude and caution prevailed in the currency markets ahead of the outcome of US Fed meeting.
Meanwhile, the benchmark BSE Sensex recovered by 125.27 points, or 0.50%, to 25,371.52 in early trade on Thursday.