The rupee today strengthened by ten paise to settle at 55.06 on dollar selling by exporters amid weakness in the American currency in international markets.

The rupee commenced higher at 55.07 a dollar at the Interbank Foreign Exchange (Forex) market from last Friday's close of 55.16.

The dollar index, a gauge of six major global currencies, was down by 0.22 per cent while New York crude oil was quoting below USD 88 a barrel in Europe today. This helped rupee gain strength.

It moved in a narrow range of 54.94 and 55.11 before settling at 55.06, a rise of 10 paise or 0.18 per cent.

Last Friday, it had fallen by 46 paise or 0.84 per cent.

Forex traders said the rupee mirrored the domestic stock market movement with the BSE benchmark Sensex today snapping its six-session string of losses by closing 29.63 points up.

Foreign Institutional Investors (FIIs) net sold shares worth just Rs 1.52 crore today as provisional data from exchanges.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said," The rupee traded in a volatile manner cramped between global and domestic sentiments. The constructive talks in US senate over fixing the fiscal cliff helped the rupee regain Friday's lost ground against the dollar but weak domestic fundamentals limited that strength."

Experts said that the current Eurozone situation makes the outlook bleak for the Euro and will impact the global economy as a whole.

"We expect rupee to further weaken towards 55.50 levels in the near term," said Abhishek Goenka, Founder & CEO, India Forex Advisors.

The premium for the forward dollar ended steady to better on stray payments from banks and corporates.

The benchmark six-month forward dollar premium payable in April closed at its last Friday's level of 144-1/2-146-1/2 paise.

Far-forward contracts maturing in October ended higher at 283-285 paise from 280-1/2-282-1/2 paise.

The RBI has fixed the reference rate for the US dollar at 54.9665 and for euro at 70.1595.

The rupee declined further against the pound sterling to 87.58 from previous close of 87.40. It also remained weak against the euro to 70.32 from 70.25.

It, however, recovered slightly against the Japanese yen to 67.83 per 100 yen from last close of 67.98.