The rupee is trading at 54.88/89 versus its previous close of 55.06/07. The unit is helped by gains in domestic shares and a risk-on mood globally on hopes for a compromise in the U.S. fiscal crisis. Rupee had earlier risen to as much as 54.79.

The Sensex is up 0.5 percent.

Pair seen moving in a 54.80 to 55.10 range in the first half of the session, with dollar demand from oil importers expected to limit the downside for the pair.

Traders are also awaiting the start of the winter session of parliament on Thursday.