After a brief overnight recovery, the rupee once again turned shaky and ended lower by 10 paise to 67.20 against the US dollar due to fresh demand for the greenback from importers and banks.
Strong domestic equity markets alongside consistent capital flows even failed to restrict the rupee fall against the dollar, a forex dealer said.
A sharp overnight rebound in dollar value on the back of buoyant macro cues also added to the downward pressure.
The home unit opened lower at 67.15 a dollar from Tuesday's closing value of 67.10 at the Interbank Foreign Exchange (Forex) market here on bouts of dollar demand.
It remained under intense volatility throughout the day and drifted to hit a fresh intra-day low of 67.2525 before ending at 67.20, showing a loss of 10 paise, or 0.15 per cent.
The rupee had gained 10 paise on Tuesday after a two-day slide.
The RBI fixed the reference rate for the dollar at 67.1720 and euro at 73.9900.
In cross-currency trades, the rupee fell back against the pound sterling to settle at 88.42 as compared to 88.30 on Tuesday.
The local unit, however, firmed up against the euro to finish at 73.98 from 74.12 and also hardened against the Japanese yen to close at 63.07 per 100 yens from 63.21 earlier.
FIIs bought a net of Rs 548.90 crore of Indian shares on Tuesday according to provisional data from exchanges.
In worldwide trade, the US dollar surged to multi-month high against basket of currencies and rose against the yen, bolstered by strong US housing data and inflation developments amid renewed expectations that the Federal Reserve may hike interest rates this year.
The US dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up 0.13 per cent at 97.19 in early trade.
Oil prices traded almost flat in thin trade ahead of weekly US crude inventory data and also rallying dollar.
In the forward market, premium for dollar eased owing to mild receivings from exporters.
The benchmark six-month premium for December moved down to 178-180 paise from 180-182 paise and forward June 2017 contract also edged down to 376-378 paise from 378-380 paise on Tuesday.
Meanwhile, equities surged for the second straight day following sustained buying interest from retailers amid optimism over passage of the GST bill and good monsoon rains.
The flagship Sensex jumped 128.27 pts to finish at 27,915.89, while broader Nifty rose pts to 8,565.85.
