Firmer shares and a revival in foreign fund inflows also underpinned the rupee, but oil import payments kept a lid on the gains, traders said.
At 11:22 a.m. (0552 GMT), the partially convertible rupee was at 44.720/725 per dollar, 0.2 percent stronger than Monday's close of 44.83/84.
"There are ECB flows," said a dealer with a state-run bank, referring to external commercial borrowings. These inflows usually rise towards the end of a financial year as companies close their accounts.
He said the rupee could appreciate to 44.64-44.65.
The main stock index rose for the sixth session as investors chased bargains after a disappointing performance since the start of January.
Foreign institutional investors have bought shares worth $879.16 million during March 1-28, lowering net sales to $1.3 billion in the year to date.
The index of the dollar against six major currencies was down 0.03 percent at 76.108 points.
Traders said there was demand for dollars from oil refiners who make their import payments at the close of each month. India imports more than two-thirds of the oil it consumes and the refiners are the biggest buyers of dollars in the forex market.
The one-month onshore forward premium dropped 2 points to 28, the three-month premium fell 2.5 points to 83 and the one-year was at 297.50 points from 301.
The one-month offshore non-deliverable forward contracts were quoted at 45.04, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all at 44.7425, with the total volume at about $2.15 billion.