The rupee failed to maintain its strong initial gains and ended lower by seven paise at 64.15, the second consecutive session fall against the US dollar due to sustained demand for the American currency from importers.
However, robust capital inflows into local equities along with greenback's weakness against other currencies overseas capped losses to some extent.
Though, the movement confined to a narrow range, the domestic currency breached the key psychological 64-mark briefly in the morning session to trade at multi-year highs before its slide.
Expectations that the US Federal Reserve will not tighten its monetary policy amid intensifying political scandal around US President Donald Trump supported rupee sentiment initially.
While, stocks enjoyed their record breaking streak for the third straight session on Wednesday.
Foreign portfolio investors (FPIs) bought shares worth Rs 858.29 crore on Tuesday, according to provisional data.
Bourses continued their historic record run in a choppy session following select buying in front-line counters even as momentum remained unabated despite profit-taking.
The local unit resumed firmly higher at 63.99 from overnight close of 64.08 at the Interbank Foreign Exchange market on bouts of dollar selling by exporters.
It then strengthened further to touch a high of 63.95 before retreating sharply to hit an intra-day low of 64.16 in late afternoon deals.
After trading range-bound, the domestic unit finally settled the day at 64.15, showing a loss of 7 paise, or 0.11 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.0214 and the euro at 71.1598.
In worldwide trade, the greenback traded lower against most major currencies in the midst of US political unrest.
It was widely reported that President Trump shared highly sensitive information with the Russia Ambassador at a recent meeting at the White House putting further pressure on US dollar.
The dollar index, which tracks the US currency against a basket of six major rivals, was down 0.35 per cent at 97.75.
In cross-currency trades, the rupee fell back sharply against the pound sterling to end at 83.13 from 82.60 per pound and drifted against the euro to finish at 71.24 as compared to 70.89 earlier.
It also dropped against the Japanese Yen to conclude at 57.07 per 100 yens from 56.36 yesterday.
The benchmark Sensex rose over 76 points to end at a new closing peak of 30,658.77, while broader Nifty gained 13.50 points to settle at a fresh high of 9,525.75.
In forward market today, premium for dollar declined due to fresh receivings from exporters.
The benchmark six-month premium payable in October moved down to 144-146 paise from 145-147 paise and the far forward April 2018 contract also edged lower to 300-302 paise from 301-303 paise on Tuesday.
On the international commodity front, crude prices retreated modestly after recent sharp rally after industry data showed a surprise increase in US crude inventories despite Opec-led output cuts that Saudi Arabia and Russia want extended amid some cautious ahead of upcoming events, the Iran presidential election and the Opec meeting.