The rupee today gained further ground to end at 67.98 against the US dollar, appreciating by 10 paise on sustained selling of the American currency by exporters and local banks even as Fed officials strike a hawkish tone.
Forex market sentiment swung back in favour of the domestic currency after the initial wave of volatility after the Reserve Bank of India's June meeting minutes signalled that the central bank will rely on data for future rate hike decisions.
The Indian currency pared all initial losses and rose past the key significant 68-mark against the US dollar.
It plunged to a intra-day low of 68.24 in early trade in a knee-jerk reaction to hawkish Fed Rhetoric after the Federal Reserve Chair Jerome Powell reiterated the central banks commitment to more interest rate increases.
Though, the headlines have been dominated by the escalating US-China trade threats and fears, which have shaken up the markets worldwide recently.
On the energy front, global crude prices took a big knock, tumbling over 1 per cent as crude exporters in OPEC appeared to be nearing a deal to increase production.
The latest OPEC meeting starts in Vienna today against a gloomy backdrop of weaker global growth, US-China trade wars tensions and a strong US dollar.
Brent crude futures, an international benchmark, is trading sharply down at USD 73.55 a barrel, in early Asian trade.
Meanwhile, bond markets maintained its bullish ascent after RBI's June policy meeting minutes gave no indication of future rate action.
The 10-year benchmark bond yield slipped to 7.77 per cent from 7.83 per cent overnight.
Earlier, the rupee resumed lower at 68.16 against previous session close of 68.08 at the interbank foreign exchange (forex) market on fresh buying of the American currency by importers, also weighed down by sustained fund outflows.
Mirroring weakness in regional currencies, it drifted sharply to hit a low of 68.24 in mid-morning deals before taking sharpe U-turn.
After retracing a fresh high of 67.95 towards the fag-end trade, the local unit finally settled at 67.98, showing a gain of 10 paise, or 0.15 per cent.
The home currency has turned strong by a whopping 40 paise in two days after diving to a fresh one-month low early this week.
The RBI, meanwhile, fixed the reference rate for the dollar at 68.1950 and for the euro at 78.7925.
The dollar index, which measures the greenback's value against the basket of six major currencies, was up at 94.81.
The American unit rose to the highest levels of the year against a currency basket benefitting from the Fed view that the US labour market is not as tight as it seems, indicating gradual monetary policy normalisation is still underway.
In the cross currency trade, the rupee gained further ground against the euro to finish at 78.47 from 78.74 and also firmed up against the Japanese yen to end at 61.51 per 100 yens as compared to 61.87 yesterday.
The local unit, however, fell back against the pound sterling to close at 89.88 per pound from 89.72 earlier.
Elsewhere, the British pound pulled back from a fresh 7-month low against the US currency after the Bank of England held interest rates steady in a more hawkish-than-expected vote amid renewed Brexit concerns.
The common currency euro hit a new 11-month low against the US dollar.
In forward market today, premium for dollar dropped sharply due to heavy receiving from exporters.
The benchmark six-month forward premium payable in October moved down to 100-102.50 paise from 103-105 paise and the far-forward April 2019 contract slipped to 245.50-247.50 paise from 248-250 paise previously.
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