Resolution:
BW does NOT cache the IP address while using the hostname in the Database Connection
However, JVM itself caches the IP address.
You can change the following JVM security property in the JVM security file (%JRE_HOME%/lib/security/java.security),
networkaddress.cache.ttl=0

Setting the above property to -
- any negative value: caching forever
- any positive value: the number of seconds to cache an address for
- 0: do not cache

So you need to modify the above JVM security property to avoid caching of IP addresses.