The rupee continued its bullish trend for the second day, rising 17 paise to end at 72.20 against the US dollar on sustained selling of the American currency even as local equities witnessed a high volatility.
The domestic currency hit an intra-day high of 71.70 before giving back early strong gains swayed by domestic stock volatility.
The Indian unit briefly touched a low of 72.48.
Although, forex market reacted muted to the 'escalation' in the US-China trade conflict with no meaningful safe haven bid for the dollar as investors adopted a “wait and see” approach ahead of China's possible retaliation to the latest round of US tariffs.
The dollar's weakness against some currencies overseas on easing trade war concerns also supported the recovery momentum.
The home currency has recovered a healthy 78 paise in the last two sessions after plunging to life lows early this week.
The Indian currency has witnessed a massive plunge in the recent past due to rising trade and current account deficits in the wake of rising crude oil prices.
The benchmark 10-year sovereign yield, however, inched up to 8.08 per cent.
Meanwhile, it was an exceptionally volatile day for Indian bourses which witnessed their biggest intra-day crash in the recent past before wiping out some of the losses after a huge fall in mortgage lender DHFL stock triggered a knee-jerk sell-offs in non-banking financial companies and jolted investor sentiment.
The flagship Sensex ended 279 points lower at 36,841.60, while broader Nifty shed 91 points to 11,143.10.
On the energy front, crude prices were mixed after falling in the previous session as US President Donald Trump urged OPEC to lower crude prices ahead of its meeting in Algeria this weekend.
Benchmark brent crude futures were at USD 79.53 a barrel in early Asian trading.
Extending its recovery momentum, the rupee opened with solid 53 paise gains at 71.84 against Tuesday's close of 72.37 at the inter-bank foreign exchange (forex) market on sustained dollar unwinding by exporters and banks.
It strengthened to hit an intra-day high of 71.70 before giving away its strong gains largely reacting to stock market volatility.
After drifting to a session low of 72.48, the local unit finally managed to pull back towards the tail-end trade and settled the day at 72.20, showing a gain of 17 paise, or 0.23 per cent.
The Financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 71.8489 and for the euro at 84.6830.
In the cross-currency trade, the rupee also gained further ground against the Japanese yen to close at 64.06 per 100 yens from 64.42 earlier.
The home unit, however, fell back against the British Pound to finish at 95.28 per pound from 95.07 and also dropped against the euro to end at 84.96 as compared to 84.50.
On the global front, the dollar was trading slightly higher against other currencies while the Japanese yen was lower as investors eyed trade war tensions.
The pound slumped amid Brexit uncertainty after the eurozone manufacturing PMI came in lower than expected.
Against a basket of other currencies, the dollar index is up at 93.69.In forward market, premium for dollar declined due to sustained receiving from exporters.
The benchmark six-month forward premium payable in January 2019 moved down to 113-115 paise from 115-117 paise and the far-forward July contract also eased to 271.50-273.50 paise from 273-275 paise.
