It was a highly volatile session as the forex market suffered a day of wild swings with the Indian currency falling to hit a fresh 2018 low of 63.85 in early breakneck selloff before similarly climbing back.
After getting off to a strong start to the year, the home currency had hit one-week low yesterday on growing worries over fiscal slippage and higher inflation pressure after international crude oil prices hit a three-year high.
The rupee lost a whopping 34 paise in last two days.
Further, the upbeat trend was supported by the unwinding of long-dollar positions by speculators and local banks in view of subdued greenback overseas trend.
In the meantime, US oil prices hit their highest since 2014 impacted by OPEC-led production cuts and healthy demand.
Brent crude futures were at $69.25 a barrel in early Asian trading, the highest since May 2015.
In a major boost to big bang reforms ahead of the Budget, the government today eased norms for investment in single brand retail, construction and power exchanges to attract more foreign investments in the sector and boost the economy and generate employment.
Meanwhile, Dalal Street's three-day record-breaking run took a breather as investors preferred to book some profits, especially from the sector-specific large capitalised scrips after their recent gains.
It strengthened to touch a fresh intra-day high of 63.53 before swiftly drifting back to trade extremely weak as oil importers stepped up dollar purchases amid an ongoing rally in crude oil prices.
After touching a low of 63.85, the local unit staged a sharp reversal to end at 63.60, showing a gain of 11 paise, or 0.17 per cent.
The dollar index, which measures the greenback's value against a basket of six major currencies, was down at 91.73 in early trade.
Globally, the dollar fell to one-and-a-half month lows against the yen amid speculation that the Bank of Japan could move to scale back its massive stimulus programme later this year.
In cross-currency trades, the rupee recouped against the pound sterling to settle at 86.17 per pound from 86.23, but retreated sharply against the Japanese yen to finish at 57.09 per 100 yens from 56.52 earlier.
The home unit also fell back against the euro to close at 76.28 compared to 75.97.
Elsewhere, Japanese yen surged to 1-month high against the US dollar following the Bank of Japan's (BoJ) move to reduce long-term asset purchases, exerting downward pressure for the second day in a row.
The BoJ decision to trim the size of its JGB purchases fuelled speculations that the BOJ could begin tapering its massive monetary stimulus catching investors off-guard.
The common currency euro and pound sterling, however, traded little changed, largely ignoring the positive macro outlook.
In forward market today, premium for dollar firmed up due to mild paying pressure from corporates.
The benchmark six-month premium payable in June edged up to 134-136 paise from 132-134 paise and the far forward December 2018 contract also moved up to 272-274 paise from 270-272 paise previously.