The rupee resumed higher at 62.08 per dollar as against the last closing level of 62.14 per dollar, a one-month high, at the interbank foreign exchange market. It moved up further to 62.07 on initial selling of dollars by banks.
However, the local currency failed to maintain its gains and dropped to 62.23 per dollar. It ended at 62.18 at the fag-end dollar demand from banks and importers on the back of higher dollar in the overseas market, showing a loss of four paise or 0.06 per cent.
The rupee hovered in a range of 62.07 per dollar and 62.23 per dollar during the day.
The currency had gained by 143 paise, or 2.25 per cent, during the previous five sessions.
In London, the euro fell back to a nine-year low on Wednesday after reports said an interim ruling from the European Court of Justice left the door open for full-scale quantitative easing.
In New York market, the US dollar extended its gains against the euro, but surrendered earlier gains against the yen and the pound on Tuesday.
Nymex-traded crude oil futures were trading near the $45-a-barrel level, amid reports of the US Energy Information Administration saying oil supplies will outpace demand through 2016.
Meanwhile, the Sensex fell by 78.91 points, or 0.29 per cent, to close at 27,346.82.
Veracity group CEO Pramit Brahmbhatt said, "Rupee traded in a thin range and ended just below the previous close at 62.18. Rupee movement was mainly hurt by the strong dollar index which is trading at $92.35 and is heading towards to post its fifth weekly gain in a row."
The trading range for the spot dollar/rupee pair is expected to be within 61.70 to 62.70, he added.
Meanwhile, premia fell further on sustained receipts by exporters.
The benchmark six-month premium payable in June moved down to 210-212 paise from 213.5-214.5 paise previously. Premium on forward contracts maturing in December also eased to 412.5-414.5 paise from 417.5-418.5 paise.
The Reserve Bank of India fixed the reference rate for dollar at 62.1530 and for euro at 73.2970.
The rupee rebounded to 94.05 against the pound from 94.10 previously and hardened to 73.02 per euro from 73.31.
It, however, fell back to 53.21 per 100 Japanese yen from 52.43 previously.