Continuing its winning run for the third straight session, the rupee today firmed up by another 4 paise to close at 68.03 against the US currency amid modest dollar selling by banks and exporters.
The domestic currency largely shrugged off the early volatility and staged a smart rebound towards the fag-end trade despite greenback's bullish overseas sentiment.
Strong momentum in the domestic equity markets and revival in foreign capital inflows also aided the rupee rise, a forex dealer said.
The dollar continued its rally for a second straight day largely outperforming almost all major world currencies driven by strong US fundamentals ahead of Q4 GDP growth data of the world's largest economy and December durable goods data.
The Fed has made it clear that on-coming fiscal policy is a key determinant in shaping the rate hike outlook.
Meanwhile, the foreign portfolio investors (FPIs) bought shares worth a net Rs 1,378.81 crore on Wednesday.
The rupee opened substantially lower at 68.18 against Wednesday's closing value of 68.07 at the Interbank Foreign Exchange (Forex) market and weakened further to hit a low of 68.23 following robust month-end demand.
However, it staged a recovery towards the tail-end trade amid smooth dollar supply and managed to settle higher at 68.03, up 4 paise, or 0.04 per cent.
Stretching the gains for the third day, it has appreciated by 17 paise against the dollar.
On weekly basis, the rupee has gained 15 paise after its relentless downtrend for the sixth straight week -- the longest falling spell since November 2015.
The US dollar index was trading higher at 100.59 in late afternoon session.
The RBI fixed the reference rate for the dollar at 68.2043 and for the euro at 72.7467.
In cross-currency trade, the Indian unit also firmed up against the British to finish at 85.33 from 85.54 per pound and strengthened against the euro to 72.76 as compared to 73.16 earlier. It also hardened against the Japanese Yen to conclude at 59.15 per 100 yens from 59.92 previously.
Meanwhile, country's foreign exchange reserves dipped by
USD 56.8 million to USD 362.73 billion in the week to February 17, on account of decline in foreign currency assets (FCAs).
Domestic bourses succumbed to fresh bout of selling pressure after rallying for six straight sessions as investors booked profits in banking, telecom and auto shares even as market heavyweight Reliance Industries maintined its surge.
The benchmark Sensex fell back over 80 points to end at 28,812.88, while broader Nifty settled 42.80 points lower at 8,896.70.
In the forward market, premium for dollar moved down owing to renewed receivings from exporters.
The benchmark six-month premium for July declined to 136-138 paise from 139.50-140.25 paise and the far-forward January 2018 contract also edged down to 292-294 paise from 295.25-296 paise last Thursday.
On global commodity front, crude prices staged a sharp rebound as traders bought the dip after last week's sharp plunge, but rising US production limited gains.
