The rupee recovered by 17 paise to Rs 64.87 against the United States dollar in early trade today on mild selling of the greenback by exporters and a higher opening in the domestic equity market.
This tamped down expectations of four rate hikes in 2018, instead of the widely anticipated three increases.
The rupee had briefly breached the significant 65-mark to hit a new three-month low of 65.11 during the mid-week trade amid chaos in currency and financial markets caused by volatility.
Reversing an eight-week uptrend, India's foreign exchange reserves dipped to United States dollars 419.76 billion during the week ended February 9, the Reserve Bank of India (RBI) said.
Brent crude futures were trading lower at United States dollars 64.36 a barrel in early Asian trading.
The domestic unit opened weak by 30 paise at 65.06 at the interbank foreign exchange market.
It later collapsed below the key 65-mark to hit a low of 65.11 before regaining some lost ground to end at 64.73, revealing a sharp loss of 52 paise, or 0.81 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 65.0458 and for the euro at 79.8307.
Most Asian stock indices finished lower.
Meanwhile, the benchmark BSE Sensex fell 144.23 points, or 0.42 per cent, to 33,700.63 in early trade today.
Meanwhile, the U.S. dollar rose to a one-week high against a basket of major currencies in early Asian trade after minutes of the Federal Reserve's January meeting showed policy makers were more confident of the need to keep raising interest rates. The dollar index against a basket of six major currencies rose 0.2 percent to 89.865 (DXY).
The home unit also edged up against the Japanese yen to settle at 60.49 per yens from 69.50.
The British pound, however, staged a rebound on the back of positive news that the EU Parliament will call for a continued and privileged access for the United Kingdom to the single market after tit leave the EU.
The Federal Reserve releases minutes of its January 30-31 meeting later today as investors look for further insight on inflation and interest rates.