Fresh capital inflows after three days of outflows and a late recovery in local equities also helped the Indian rupee.
At the interbank foreign exchange market, the local currency resumed lower at 62.22 a dollar from the previous close of 62.07 and declined to a low of 62.24 as domestic equities declined.
It rebounded to a high of 61.9650 on late dollar selling by exporters before ending at 62.07. Yesterday, it had gained 23 paise to a one-week high.
The benchmark 30-share S&P BSE Sensex fell 16.01 points today. Overseas investors bought a net 27.07 million of shares yesterday, as per Sebi data.
"The rupee recovered and closed flat as the dollar index, which measures the greenback against a basket of six major rivals, traded weak after strengthening for two consecutive days," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India). "Now the local investors are eyeing the release of key inflation data next week."
Forward dollar premiums closed sharply lower on continued receipts by exporters.
The benchmark six-month forward dollar premium payable in June dipped to 235-1/2 to 237-1/2 paise from 242-244 paise previously and far-forward contracts maturing in December tumbled to 472-474 paise from 481-483 paise.
The RBI fixed the reference rate for the dollar at 62.1810 and for the euro at 84.4960.
The rupee fell to 102.15 against the pound from the previous close of 101.88 and turned negative to end at 84.45 per euro from 84.33. It improved to 59.15 per 100 Japanese yen from 59.26.
India rupee hits one-week high; weak shares hurt
Reuters: The Indian rupee ended little changed on Thursday after hitting a one-week high earlier in the session, as dollar sales by foreign investors looking to invest in debt were offset by a choppy domestic stock market which recorded its sixth decline in seven sessions.
A fall in blue-chips such as Larsen and Toubro on anxiety ahead of the quarterly earnings season and inflation data hurt local shares.
India's inflation rate will probably ease in December from stubbornly high levels, helped by waning food prices, a Reuters poll showed, providing some respite to the Reserve Bank of India which has been struggling with cost pressures and slow growth.
"Custodian banks were among the major sellers today. Range-bound trading is expected to continue in the near-term," said Vikas Babu Chittiprolu, a senior foreign exchange dealer at state-run Andhra Bank.
Foreign funds, which turned net buyers of over $850 million worth of bonds in December after a six month hiatus, have so far in 2014 purchased a net $215.50 million. Debt related inflows were also seen on Thursday, dealers said.
Government bonds rose as investors were assuaged by comments from a central bank deputy governor that a proposed debt switch may happen only in the next fiscal year starting April.
In equities, foreign buying has waned with investors having bought only a net $60.70 million so far this month, after purchasing over $20 billion in 2013.
The partially convertible rupee closed at 62.07/08 per dollar, unchanged from its previous close. It rose to 61.9650 during the session, its strongest since Jan. 2.
The Indonesian rupiah led gains among emerging Asian currencies on Thursday as investors covered short positions in regional units, while South Korea's won rose after the central bank left rates steady.
In the offshore non-deliverable forwards, the one-month contract was at 62.42 while the three-month was at 63.27.