After crashing to life-time lows yesterday, the rupee staged a spirited recovery to end higher by 33 paise at 68.46 against the US dollar today in line with a big relief rally in domestic equities.
Propped up by heavy dollar selling intervention by the RBI, the Indian unit touched a fresh intra-day high of 68.35.
This was the first gain posted by the rupee in the last four sessions.
Overall forex sentiment, however, remained cautious due to rising crude prices and concerns over fiscal slippage.
The rupee largely took cue from weak dollar overseas, despite month-end greenback demand from corporates and oil importers.
The Indian currency had suffered its worst drubbing and crumbled to hit a fresh all-time low of 69.10 against the benchmark currency US dollar on Thursday before staging some recovery.
The domestic unit had yesterday ended at a record closing low of 68.79, falling 18 paise against the US dollar due to multiple headwinds. The rupee's previous all-time closing low was 68.73, touched on November 24, 2016.
Today, at the interbank foreign exchange (forex) market, the home currency opened sharply higher at 68.70 against overnight close of 68.79 on fresh selling of the American currency by banks and exporters.
Keeping the overall bullish trend, it touched a session high of 68.35 in late morning deals before concluding at 68.46, showing a steep rise of 33 paise, or 0.48 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 68.5753 and for the euro at 79.8491.
The bond market also regained some lost ground and the 10-year benchmark bond yield slipped to 7.90 per cent against 7.94 per cent previously.
Meanwhile, the benchamark Sensex surged by 385.84 points to end at 35,423.48, while the Nifty zoomed 125.20 points at 10,714.30.
On the energy front, brent crude futures, an international benchmark, is trading sharply up at USD 78.73 a barrel in early Asian trade.
As the second half of 2018 gets under way, the rupee has depreciated by 8.03 per cent or a staggering 509 paise against the greenback after an impressive start.
The rupee has emerged as the worst performing currency in Asia In the current year so far.
Most Asian currencies also suffered worst against the grim backdrop of US President Donald Trump's protectionist policy measures.
The rupee has been steadily losing ground this year on concerns over deteriorating macro environment after a sharp crude rally put the focus back on India's widening twin deficit and potential impact on the economy.
Escalating trade tensions between the world's two largest economies against the backdrop of a potentially more hawkish Federal Reserve have complicated matters further.
The local unit had touched a fresh three-year high of 63.37 per dollar in January before starting downfall.
Globally, the dollar traded substantially weak against major trading rivals, especially against many emerging market currencies on increasing worries about US trade disputes.
The dollar index, which measures the greenback's value against basket of six major currencies, was down at 94.52.
In the cross currency trade, the domestic unit remained firm against the pound sterling to settle at 89.98 per pound from 90.05 and edged higher against the Japanese yen to finish at 61.90 per 100 yens from 62.41 earlier.
The local currency, however fell back against the euro to close at 79.78 as compared to 79.71.
In forward market today, premium for dollar moved up due to mild paying pressure from corporates.
The benchmark six-month forward premium payable in October edged up to 97-99 paise from 96.50-98.50 paise and the far-forward April 2019 contract rose to 245-247 paise from 243-245 paise. PTI EDM RHB MKJ