Rising for the second straight session, the rupee today ended marginally higher by two paise at 63.86 against the American currency.
After the overnight rebound, the forex market exhibited some nervous trading movements and swung between gains and losses in the absence of any major trigger.
It oscillated in a narrow band of 63.74 and 63.95 during the day.
The rupee resumed marginally positive at 63.85 against its previous close of 63.88 at the Interbank Foreign Exchange (forex) market on the back of dollar inflows amid bullish equities.
It later strengthened to a high of 63.74 in late morning deals but subsequently started losing ground even as the dollar gained some positive traction against other Asian peers.
After touching an intra-day low of 63.95 towards the tail-end trade, the local currency managed to recoup losses and ended with a modest 2 paise gain at 63.86.
Sustained FII inflows into local stocks and debt markets predominantly kept the momentum going despite dollar demand from refiners and other importers.
Expectations of a major overhaul of its foreign direct investment (FDI) policy and also reports suggesting that the government is considering allowing foreign investors to own larger stakes in the country's lenders further brightened the rupee sentiment.
Though, a pull back in global crude prices and fag-end dollar demand from importers and banks largely weighed on trade.
On the international commodity front, crude prices edged higher on a reported decline in US crude inventories, but prices stayed below recent three-year highs on ample fuel supplies.
Brent crude futures were trading lower at USD 69.46 a barrel in early Asian trading.
Meanwhile, domestic bourses conquered yet another historic peak after their roller coaster ride driven by solid corporate earnings reports and expectations of strong reforms measures.
Some Asian markets also hit new record highs largely supported by overnight Wall Street rally.
The benchmark BSE-Sensex jumped over 178 points to end at 35,260.29, while Nifty rose 28 points at 10,817.
On the global front, the greenback remained moderately lower against other major currencies, as investors remained cautious ahead of a flurry of US economic reports due later in the day.
The dollar index, which measures the greenback's value against a basket of six major currencies, was down at 90.33 in early trade.
In cross-currency trades, the rupee lost further ground against the pound sterling to settle at 88.59 per pound from 88.15 and retreated against the euro to finish at 78.15 compared to 78.02 yesterday.
The domestic unit, however, firmed up against the Japanese yen to close at 57.40 per 100 yens from 57.69 earlier.
Elsewhere, moved in a narrow range after slipping from three-year peaks following cautious comments by ECB officials about the currency's strength and expectations that Eurozone monetary policy will remain accommodative for some time.
In forward market today, the premium for dollar drifted due to sustained receiving from exporters.
The benchmark six-month premium payable in June moved down to 124.50-126.50 paise from 126.50-128.50 paise and the far forward December 2018 contract also eased to 261.50-263.50 paise from 263.50-265.50 paise previously.
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