The partially convertible rupee closed at 61.77/78 per dollar compared to its close of 63.38/39 on Wednesday.
The Sensex ends up 16 points to end at 20,514.
There was sustained selling of the American currency by exporters ahead of a decision of US Federal Reserve on tapering its monetary stimulus.
In a speech to the National Economists Club that echoed dovish comments by his nominated successor, Janet Yellen, Bernanke also said that while the economy had made significant progress, it was still far from where officials wanted it to be.
In India, it is not easy to fight it out with the large banks which are nimble-footed and technology-savvy and are continuously innovating on the retail turf with newer products for customer acquisition.
A firming trend in domestic stock markets, however, capped the rupee fall to some extent
The new Guv needs to focus on structural inflation problems.
The prime minister made a reference to orderly exit from unconventional monetary policies in the backdrop of splits between emerging markets and the US.
The Indian unit opened higher at 66.10 per dollar as against overnight level of 66.30 at the Interbank Foreign Exchange market and firmed up further to 66.04 on initial dollar selling.
With the US housing and labour markets on the mend, the healing looks more durable, say RBS's Sanjay Mathur and Louis Kuijs.
The rupee on Thursday plunged by a whopping 130 paise to hit life-time low of 60 against the US dollar in early trade on the Interbank Foreign Exchange on strong demand for the American currency from banks and importers
Expressing concern over the rupee reaching an all-time low, the Bharatiya Janata Party (BJP) said the currency is likely to plunge further as a share of the US financial stimulus package given to India during the sub-prime crisis in 2008-09 may be withdrawn by the Federal Reserve.
A look at the frenzy over Twitter's IPO shows that the markets believe that monetary policy will be good for risk assets.
It has been a choppy Samvat 2069 for the global markets.
Politics ahead of general elections, Fed tapering threats and inflation to keep markets on the toes.
The rupee's gains came even as most emerging Asian currencies eased as the yuan fell beyond 6.20 to the dollar for the first time since April last year amid market speculation that the central bank will keep the currency weak as economic growth slows.
Interview with Asia-Pacific economist, Morgan Stanley
Winding down quantitative easing will be messy for the West and a big problem for India.
India, China and Russia have "squandered" capital by financing inefficient technologies, United States Federal Reserve Chairman Allan Greenspan has charged.
A potential early wind-down of the US stimulus programme and a shrink in China's factory activity pulled down markets.
The NSE index Nifty ended above the 10,500-mark.
The government is worried the trade gap could worsen again and the currency could weaken as the US Federal Reserve looks set to start tapering its economic stimulus soon.
The broader markets ended lower with mid-caps and small-caps falling over 1 per cent on the BSE.
The central bank also asserted that the country is ready for the tapering of the US Federal Reserve's bond purchases.
After trading hours, the government said the June-quarter current account deficit widened to $21.8 billion from $18.1 billion in the previous quarter.
Investors need to ask some basic questions before betting in the markets on the Gujarat model's national success.
Global funds have pumped in over Rs 38,000 crore (about $5.5 billion) into domestic equities since February 20, helping the Sensex rebound 2,671 points, or 7.6 per cent, from its 2019 low.
It wants to wait for more evidence of solid economic growth before making any changes.
Markets ended on a strong note after an extremely volatile trading session this Wednesday, on back of significant buying witnessed in the realty and bank spaces.
Equity benchmarks erased early gains after realty, capital goods, teck, auto, PSU, IT, power and bankex counters came under selling pressure, falling up to 1.28 per cent.
India is better prepared to deal with any further US Fed tapering, but the country needs to remain vigilant to face eventualities, Reserve Bank Governor Raghuram Rajan said.
Reserve Bank of India Governor Raghuram Rajan took charge of India's central bank when the rupee seemed to be in a tailspin while the country was facing runaway inflation.
RBI Governor Raghuram Rajan on Friday said keeping inflation low is the key task for sustainable economic growth of the country.
'Industrial countries are still struggling, with a few exceptions, to grow and the uncertainty about growth in the US as well the world is probably what impelled the Fed to stay on hold.'
The rupee fell 4.8 per cent last month, and was the worst performing Asian currency as the dollar rallied broadly on speculation that the Federal Reserve will begin reducing its monetary stimulus later this year.
If the Sensex manages to make fresh closing highs, traders would look forward to the index breaching its highest level of 21,206.77.
He takes over at Mint Road at a time when the governor's job is even less easy than it is normally.
India's benchmark index, Sensex ended on a flat note after a volatile trading session as investors braced for the US Federal Reserve policy meeting with caution.
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