Robust capital inflows alongside a slightly weaker greenback too reinforced the dominance of the home currency
Investors are keenly awaiting the announcement of the macroeconomic data-IIP and CPI due on Tuesday.
The rupee continued to rule firm against the dollar for the second consecutive day.
Markets ended in red, index heavyweights drag.
Persistent foreign capital inflows also boosted sentiment.
The rupee declined marginally by 3 paise to 66.03 per dollar on fresh demand for the US currency from banks and importers.
However, the hefty initial gains of the rupee, which had jumped to 61.05 intra-day, were substantially erased on month-end demand for US dollars from private oil firms and some defence-related purchases, amid fall in domestic stocks.
Spurting by a whopping 21 paise, the rupee scaled a fresh over 50-1/2-month closing peak at Rs 43.53/54 per dollar on Wednesday.
The domestic currency has gained by four paise or 0.06 per cent in two days.
RBI fixed the reference rate for the dollar at 66.2930 and euro at 74.8978.
The rupee added another 8 paise to end at 61.23 against the dollar, the highest level in more than two weeks, as the US currency traded stable ahead of the outcome of Federal Reserve's meeting today and as domestic shares surged to a record.
The rupee had slumped to its all-time closing low of 68.80 a dollar on August 28, 2013.
The Fed's decision on tapering its monthly $85 billion bond-buying programme is expected later on Wednesday.
Sharp fall in domestic stock market also affected the rupee sentiment.
The rupee extended gains for the second straight session against the US currency by firming up 21 paise to close at 64.82 a dollar.
Unwinding of long dollar positions ahead of the US job data backed the rupee sentiment
The rupee showed range-bound movement on Wednesday as investors preferred to stay cautious in the unsure market.
A strengthening dollar overseas also kept the rupee under pressure amid demand from importers. Goldman Sachs followed JP Morgan, HSBC and Nomura in cutting India's economic growth forecast and also said it expects the rupee to touch 72 against the dollar in the next six months.
Increased month-end demand for the US currency from importers put pressure on the rupee
The rupee continued to slide against the pound sterling and finished at 102.64 as against 102.25 previously.
The domestic currency has dropped 40 paise or 0.60 per cent in two days
The rupee on Tuesday fell by 25 paise to 65.05 on fresh dollar demand from banks and importers despite persistent foreign capital inflows.
The rupee had recovered by 8 paise to close at 66.91 in Tuesday's trade.
A weak dollar sentiment across the board alongside unwinding of long positions by speculative traders ahead of key US macro data release largely supported the rupee
India's foreign exchange reserves declined by a whopping $4.343 billion to $367.646 billion.
At the Interbank Foreign Exchange market, the domestic unit commenced higher at 61.80 a dollar from previous close of 61.92.
The domestic unit moved in a range of 64.14 and 63.99.
The American currency regained its buoyant strength after a brief sideways movement following overnight US Fed's optimistic tone about the future of the US economy
Bullish dollar sentiment overseas alongside sluggish domestic equity market predominantly impacted the domestic currency
The rupee hit a near 10-month high as an alliance led by pro-reform and business friendly Hindu nationalist Narendra was on course for an absolute majority.
Rupee is under pressure against the dollar say currency watchers.
The rupee rallied smartly against the US currency and scaled a new 27-1/2-month closing peak of Rs 46.5350/5450 per dollar on Thursday.
The Indian currency had appreciated by a whopping 85 paise in three-day surge
The rupee recovered marginally at close against the dollar.
The domestic currency had last touched 65-level and ended at 65.24 on September 6, 2013. It moved in a range of 64.63 and 65.23 during the day.
Forex market was shut on Tuesday on account of 'Mahavir Jayanti'.
Foreign institutional investors pulled out Rs 86.66 crore (Rs 866.6 million) from local stocks on Monday, as per provisional BSE data.
The currency lost six paise on sustained dollar demand from importers.
The rupee briefly touched 66.78 in late afternoon trade due to stray dollar buying by some banks.
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Fag-end dollar selling by exporters helped the rupee to recover lost ground and settle at the day's high of 60.77, a gain of 11 paise. The rupee earlier touched an intra-day low of 61.21 on July 8.
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