The rupee failed to benefit from highly bullish macroeconomic trends and ended virtually stable at 65.17 against the US dollar even as India regained title of world's fastest-growing major economy amid imminent Fed rate hike fears.
Frantic capital outflows against the grim backdrop of ongoing steep correction in domestic equities along with resurgent dollar overseas predominantly kept currency market under immense pressure.
Moreover, currency traders and speculators avoided taking huge positions ahead of the long weekend also the focus turned towards the second testimony by Fed's Powell later in the day.
The Indian unit plunged to fresh 3-month low yesterday on US rate hike worries after Fed Chair reiterated on Tuesday that the US central bank will likely move forward with gradual increases in interest rates.
The rupee has lost a staggering 159 paise in February alone.
Showcasing a stellar growth and wresting back to defend the title of fastest-growing economies of the world, the country's gross domestic product (GDP) grew 7.2 per cent in the October-December quarter, showing a sustained pick-up in growth recovery in an economy that was hit hard by issues related to the roll out of the Goods and Services Tax (GST) and lingering impact of demonetisation.
India's return to robust growth comes as a shot in the arm for the Modi government that has been battling dissenting voices against the demonetisation and GST disruptions, including a sudden spike in global crude prices which also comes ahead of a general election due next year.
Overall forex market sentiment witnessed a sea change in the macroeconomic parameters after India jumped to 100th position in the World Bank's 'ease of doing business' ranking, following government's strong policy measures to attract investments and revive the economy.
The 'feel good' factor in the economy and the relative political stability improved the perception about the Indian economy's prospects among foreign investors.
While, another data showed eight infrastructure sectors grew a faster pace of 6.7 per cent in January against 3.4 per cent in the year-ago month.
After trading in a narrow band of 65.10 and 65.25, the local unit finally settled unchanged at 65.17 against the US currency.
For the week, the rupee depreciated by a sharp 44 paise.
The RBI, meanwhile fixed the reference rate for the dollar at 65.2261 and for the euro at 79.5041.
Forex and money market will remain closed tomorrow on the occasion of Holi.
At the international energy front, global crude prices traded little changed after sliding sharply overnight even as investors shied away from riskier assets amid volatile equity markets and resurgent US dollar, limiting overall interest in commodities.
Brent crude futures were trading at USD 64.58 a barrel in early Asian trading.
The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 90.75 in early trade.
However, in cross-currency trades, the rupee gained further ground against the pound sterling to finish at 89.54 per pound from 90.36 and also hardened against the euro to close at 79.41 as compared to 79.65 previously.
The home unit, however, dropped further against the Japanese yen to end at 61.05 per yens from 60.85 earlier.
The common currency euro fell sharply to hit fresh 6-week low against the greenback despite final manufacturing PMIs in the euro area for January came in on the strong side.
Pound Sterling retreated after a brief recovery earlier as EU is set to publish the first draft of a Brexit withdrawal treaty later in the day.
In forward market today, premium for dollar firmed up owing to fresh paying pressure from corporates.
The benchmark six-month forward premium payable in August moved up to 125-127 paise from 121.50-123.50 paise and the far-forward February 2019 contract also edged higher to 242-244 paise from 237.50-239.50 paise yesterday.