Heavy unwinding by foreign portfolio investors and lacklustre equities dampened the sentiment
In a lacklustre trade, the rupee, Wednesday, closed almost flat at 67.02 against the American unit amid caution ahead of the US Federal Reserve policy decision.
The Federal Open Market Committee's (FOMC) two-day meeting which concludes later in the day largely kept currency traders and investors sidelined.
Heavy unwinding by foreign portfolio investors and lacklustre equities further dampened the sentiment.
The home currency opened slightly firmer at 67.00 as compared to overnight closing value of 67.01 at the Interbank Foreign Exchange (forex) market and gained further ground to hit an intra-day high of 66.98 briefly due to fresh dollar selling by banks and exporters.
It then swiftly lost upside momentum and pared initial small gains to touch a low of 67.1450 in late morning deals on stray dollar demand and also dragged down by losses in local equities.
However, the home currency staged a smart rebound towards the tail-end trade and settled at 67.02, showing a mere one paisa loss.
The rupee had depreciated by 5 paise to end at 67.01 against dollar overnight.
Foreign funds sold shares worth Rs 1,146.93 crore yesterday, as per provisional data from exchanges.
The greenback pared early gains and remained little changed against majority of its peers ahead of the US Federal Reserve's policy outcome due later in the day.
In the meantime, Bank of Japan (BoJ) kept interest rates on hold at minus 0.1 per cent in an overhaul of its massive stimulus programme but did not rule out taking them further into negative territory if needed, marking the latest attempt to boost inflation and kickstart the torpid economy.
The US dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was down 0.16 per cent at 95.82.
Meanwhile, RBI fixed the reference rate for the dollar at 67.0631 and euro at 74.6949.
In cross-currency trades, the rupee remained firm against the pound sterling to end at 86.79 as compared to 86.84 and rebounded against the euro and closed at 74.67 from 74.88.
It, however, continued to drift against the Japanese yen and concluded at 66.12 from 65.76 per 100 yens earlier.
In the forward market, premium for dollar continued its downward trend due to consistent receiving by exporters.
The benchmark six-month premium for February moved down to 169-171 paise from 171-172 paise and the forward August 2017 contract also dropped to 352.75-353.75 paise from 355-357 paise on Tuesday.
Meanwhile, domestic stocks remained under pressure for the second straight day as investors booked profits ahead of US Federal Reserve interest rate decision.
The BSE Sensex settled 15.78 points down at 28,507.42, while broader Nifty ended a point higher at 8,777.15.
Crude oil prices rose sharply buoyed by a surprisingly large drop in US crude inventories and also impacted by an oil service workers strike in Norway that could impact output from Western Europe's biggest crude producing region.