Mumbai: The rupee strengthened by 20 paise to close at 55.11 against dollar on fresh selling of U.S. currency by exporters amid speculation that Fed Chairman Ben Bernanke will hint at monetary easing measures in a Congressional appearance.

Forex dealers said quantitative easing (QE), which increases money supply on account of the U.S. government buying assets, tends to put pressure on the currency.

As a result, exporters and some banks in India sold dollars on hopes of further dollar fall overseas, helping the rupee recover, traders said.At the Interbank Foreign Exchange (Forex) market, the rupee opened sharply higher at 54.89 a dollar from its previous close of 55.31.

It immediately touched a high of 54.80 on early rise in local equities amid heavy dollar selling by exporters. Foreign Institutional Investors (FIIs) continued their buying with stocks worth 475 crore today.

However, the sentiment in favour of rupee was hit in line with stocks that weakened and the currency touched a low of 55.22. It finally concluded at 55.11, a rise of 20 paise of 0.36percent over yesterday.

"Dealers are looking ahead for the Fed Chairman Bernanke testimony to the U.S. Congress...We expect the rupee may witness a gap up opening tomorrow in absence of fresh QE from Fed," said Alpari Financial Services (India) CEO Pramit Brahmbhatt.

Reflecting the optimism, the dollar index -- an indicator of a basket of six major currencies -- was down by nearly 0.1percent. The dollar weakened for a third day against euro.

However, some experts feel the chances of further quantitiave easing by Fed are bleak even though a spate of economic data strengthens its case now.

Meanhwile, the Indian stock market benchmark Sensex, which was up by over 130 points in the morning, fell back and closed nearly flat.