Rupee opened on a flat note and appreciated by 3 paise to 71.32 against the dollar in early trade on Thursday
The RBI bought has about $18 billion of foreign exchange since the end of September.
The rupee gain was further strengthened by weakening of dollar against the key rival currencies.
The rupee dropped to 72.2425 per dollar earlier this month, a whisker away from a nine-month low of 72.4075 set in September.
Weak opening in domestic equities also weighed on the domestic currency, however, sustained foreign fund inflows and easing crude oil prices capped the losses, forex traders said.
Also, the sudden drop in Chinese yuan led to increased volatility in emerging market currencies, including the rupee
The domestic currency on Tuesday furthered its loss by another 28 paise to close at a new six-month low of 71.71 as economic uncertainties continued to weigh.
The domestic unit on Tuesday spurted by 54 paise, its biggest single-day gain in more than five months, to close at a one-week high of 71.48.
On Wednesday, the domestic currency rebounded from a six-month low to end at 71.27, up 13 paise.
The government and RBI should address overvaluation
The Chinese yuan, too, fell to an 11-year low, responding to the US-imposed tariffs on imports
The concerns persist even after an assurance from a government official that the borrowing plan remains unchanged
Almost all the talk at present is about import substitution and raising tariffs, but a fundamental reason for India's recent slowdown has been its failure to generate export momentum, writes T N Ninan
Going long on the rupee with borrowed dollars offered the best returns in the past month in Asia
Average daily volumes for rupee in the UK soared to $46.8 billion in April, a more than five-fold jump from $8.8 billion in 2016
IT and pharma funds have returned 4.4% and 1.77% in the past month, respectively
Investors can take a few steps to counter the impact of a depreciating rupee
Having hard-currency assets overseas can be fruitful if the rupee falls
The rupee is set for its worst monthly loss in six years and some analysts warn of more pain to come
The Reserve Bank's decision to transfer a record Rs 1.76 trillion dividend and surplus reserves to the government revived the rupee, forex traders said