The rupee managed to pull things back towards the fag-end and edged higher by 2 paise to 64.56 a dollar on emergence of mild selling of the American currency by banks and exporters.
Weaker dollar overseas along with better local equities provided some kind of temporary relief to the rupee even as geopolitical tensions continued to cast shadow over the forex market sentiment.
Steady capital outflows also weighed on trade.
The domestic currency touched a low of 64.72 in early trade against the greenback.
Domestic equities found winning ways after days of corrections on the back of value buying in key front-line stocks along with beaten-down technology stocks amid better Asian cues.
However, foreign portfolio investors (FPIs) sold shares worth a net Rs 673.38 crore yesterday.
Notwithstanding the impact of demonetisation, India returned to fiscal consolidation in the fiscal year 2016-17 largely due to the near-elimination of fuel subsidies and enhanced targeting of social benefits, the IMF said today.
The rupee resumed substantially lower at 64.66 from Wednesday's close of 64.58 at the Interbank Foreign Exchange (Forex) Market here on fresh bouts of dollar demand from importers.
It remained under immense pressure and tumbled to hit an intra-day low of 64.72 in late afternoon deals.
But, the local unit made a smart recovery towards the fag-end trade to settle a notch higher at 64.56, showing a gain of 2 paise, or 0.3 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.6364 and for the euro at 69.3355.
In worldwide trade, the dollar inched lower against a basket of major currencies, suffering from a solid performance by the euro before the first round of French presidential elections and from an improvement in sentiment towards Britain's pound this week.
The dollar index, which tracks the US currency against a basket of six major rivals, was down 0.21 per cent at 99.50.
In cross-currency trade, the Indian unit also recouped against the pound sterling to end at 82.57 from 82.99 per pound and continued to ruled firm against the Japanese Yen to close at 59.19 per 100 yens from 59.29 yesterday.
It, however remained weak against the euro to conclude at 69.37 compared to 69.17.
On the equity front, the flagship Sensex jumped over 85 points to end at 29,422.39, while broader Nifty rose 32.90 points to 9,136.40.
In the forward market today, premium for dollar remained under pressure owing to sustained receivings from exporters.
The benchmark six-month premium for September dropped to 142-144 paise from 145-147 paise and the far-forward March 2018 also drifted to 299-301 paise from 301-303 paise yesterday.
In the global commodity front, crude prices regained some ground on Thursday after a massive plunge overnight after data showed slight drop in US crude inventories stoking hopes that a global supply overhang might slowly retreat.
The global benchmark Brent crude futures were trading at USD 53.08 per barrel, up 15 cents, or 0.3 per cent, from their last close.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)