The rupee staged an impressive comeback after plunging to a fresh three-week low and ended with a modest loss of 3 paise at 64.15 a dollar today even as local equities put up a strong performance.
The outcome of the two-day policy meeting of the Federal Reserve and resurgent dollar overseas largely kept forex market sentiment little shaky throughout the day.
Fresh bouts of dollar demand from importers and fears over a sudden capital flight added some extra pressure.
But, a spectacular rally in domestic equities and easing geopolitical tension between the US and North Korea predominantly helped the local unit to recover from early steep fall.
The home currency tumbled to as low as 64.33 in early trade -- the level which was last seen on July 26.
Meanwhile, a surprise rise in both wholesale and retail inflation numbers in July reduced chances of further reduction in key policy rates in the near future.
The country's export growth showed improvement with a nominal 3.94 per cent rise impacted by strong rupee and GST.
Strong economic indicators and easing geopolitical tensions kept US dollar firm against major trading rivals globally ahead of the release of minutes from the Federal Reserve's last meeting, due later today.
Meanwhile, riding on a global relief rally, domestic bourses staged a solid performance for the second session following across-the-board buying spree as sentiment got a boost from easing geopolitical tensions also supported by short-covering, lifting the benchmark indices over 1 per cent.
Foreign institutional investors (FIIs) sold shares worth Rs 1,638.83 crore on Monday, as per provisional data.
At the Interbank Foreign Exchange market, the rupee opened sharply lower at 64.28 as compared to Monday's level of 64.12 per dollar.
It later touched a low of 64.33 in mid-morning deals due to heavy dollar pressure but managed to recoup most of its early losses to end at 64.15, showing a small loss of 3 paise or, 0.05 per cent.
The rupee had recovered on Monday after scripting its biggest weekly fall this year.
Forex and money market will remain closed tomorrow on account of Parsi New Year.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.2428 and for the euro at 75.3761.
The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 93.85.
In cross-currency trades, the rupee rose sharply against the pound sterling to end at 82.54 from 83.16 per pound and strengthened against the Japanese yen to settle at 57.90 per 100 yens from 58.47.
It also recovered against the euro to finish at 75.12 from 75.63 earlier.
In worldwide trade, the pound sterling bounced back from five-week low against dollar after both unemployment data for June and average earnings for the month beat forecasts. The euro traded flat.
In forward market today, premium for dollar continued to fall due to persistent receivings from exporters.
The benchmark six-month premium payable in January edged down to 124-126 paise from 126-128 paise and the far forward July 2018 contract also eased to 256-258 paise from 259-261 paise.
On the International commodity front, crude prices regained some lost ground lifted by declining US crude inventories also supported by the release of official US Energy Information Administration data later on Wednesday for a further update on inventories.
Brent crude futures were at USD 51.14 per barrel in early Asian trade.
Disclaimer: No Business Standard Journalist was involved in creation of this content
