The dollar index was down 0.01 per cent at 95.86 against a basket of six currencies in early trade
The rupee turned weaker after two straight days of gains and ended below the psychologically key 67-mark in a nervous trading session, on Tuesday, amid uncertainty over the Fed rate-hike action.
It lost a modest five paise to settle at 67.01 against the American currency.
Sentiment across the globe was relatively muted and traded cautiously ahead of highly-anticipated monetary policy decisions by the Federal Reserve and Bank of Japan.
Most emerging Asian currencies too remained wary.
Both the major central banks are scheduled to announce their respective monetary policy decision on Wednesday.
The domestic unit resumed modestly lower at 66.98 from Monday's closing value of 66.96 at the Interbank Foreign Exchange (forex) market on fresh demand for the American currency from importers as well as sluggish equities.
It largely traded in a tight range of 66.94 and 67.07 throughout the day given traders' hesitancy to take any risk ahead of the major central banks meetings before finally ending at 67.01, showing a small loss of 5 paise, or 0.07 per cent.
The US dollar traded broadly lower against its major trading counterparts amid highly cautious with investors preferring the sidelines until a clearer US monetary picture emerges.
The greenback, gauged by the US Dollar Index, was up 0.06 per cent at 95.85.
The RBI fixed the reference rate for the dollar at 67.0200 and euro at 74.8814.
In cross-currency trades, the rupee rose sharply against the pound sterling to close at 86.84 from 87.38, while fell back against the euro to end at 74.88 as compared to 74.76, on Monday.
It also moved down further against the Japanese yen and finished a tad lower at 65.76 from 65.74 per 100 yens earlier.
In the forward market, premium for dollar remained under immense pressure on the back of sustained receiving by exporters.
The benchmark six-month premium for February declined to 171-172 paise from 173.5-174.5 paise and forward August 2017 contract also fell sharply to 355-357 paise from 362-364 paise.
Meanwhile, equities snapped a four-day rally on the back of profit-taking ahead of highly-anticipated monetary policy decisions by the Federal Reserve and Bank of Japan.
The BSE Sensex dropped 111.30 points to end at 28,523.20, while broader Nifty fell 32.50 points to 8,775.90.
Crude prices edged lower after a overnight rally ahead of an expected build in US crude oil stocks and on Venezuelan comments that the oil market remains oversupplied by 10 per cent.
Photograph: Reuters
