The rupee struggled to hold on to early strong gains and eventually ended the day almost flat at 64.38 against the US dollar amid a caution ahead of the RBI policy decision.
The Indian currency soared to a fresh 3-month peak of 64.21 in early trade before retreating sharply.
The Reserve Bank's two-day monetary policy review kicked off today, though the apex bank is widely expected to keep policy rates unchanged.
Overall currency market movement was marked by volatility and witnessed violent swings throughout the day.
Meanwhile, rating agency Fitch slashed India's GDP forecast for the current fiscal to 6.7 per cent.
In early trade, the rupee resumed higher at 64.30 from overnight close of 64.37 at the Interbank Foreign Exchange (forex) market on fresh dollar unwinding by exporters.
It strengthened further ground to hit a new 3-month high of 64.21 in mid-morning deals before reversing most of the intra-day gains.
Later, the home unit took a steep slide to touch a low of 64.46, but eventually managed to pull back towards the fag-end trade at settled almost flat with a mere loss of 1 paisa at 64.38.
The rupee had recovered 9 paise on Monday.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.3764 and for the euro at 76.3762.
Brent crude, an international benchmark, is trading at USD 62.23 a barrel in early Asian trade.
Meanwhile, domestic bourses succumbed to fresh bouts of profit-taking as investors turned cautious a day before the central bank's monetary policy decision.
The flagship Sensex declined over 67 points to end at 32,802.44, while the Nifty eased nearly 10 points at 10,118.25.
On the global front, the US dollar held onto modest gains against other major counterparts as the approval of a major tax reform plan by the US Senate continued to support demand for the greenback.
The dollar index, which measures the greenback's value against a basket of six major currencies, was down at 93.10 in early trade.
In cross-currency trades, the rupee recovered after recent spell of downtrend against the Pound sterling and finished at 86.33 from 86.96 per pound and fell back against the euro to conclude at 76.42 from 76.30 earlier.
It also drifted back against the Japanese yen to close at 57.26 per 100 yens as compared to 56.99.
Elsewhere, the pound sterling retreated sharply against the US dollar after Brexit negotiations took a turn for the worse, prompting investors to cut their long bets and also impacted by weaker-than-expected UK PMI services.
In forward market today, the premium for dollar declined following mild receiving from exporters.
The benchmark six-month premium payable in May eased to 139-141 paise from 141-143 paise and the far forward October 2018 contract also softened to 278-280 paise from 279-281 paise yesterday.
On the International energy front, crude prices edged higher on expectations of a drop in US crude stockpiles and aided by last week's deal between OPEC and other crude producers to extend output curbs.