FIIs pumped in nearly Rs 340 crore in stocks today as perprovisional data on stock exchanges.
FIIs bought stocks worth just Rs 83.16 crore as per provisional data.
Forex dealers said dollar selling by exporters and a higher opening in the equity market also supported the rupee.
It had strengthened by 45 paise on Tuesday to close at one-month high of 55.07 against the dollar, tracking a jump in local shares.
Forex dealers said a higher opening in the domestic stock market and euro's gain against the American currency as concerns over eurozone and the US eased, supported the rupee.
The rupee on Thursday lost 25 paise to 55.72 against the US dollar in early trade at the InterbankForeign Exchange market as the American currency gained strength against other currencies overseas.
In addition, dollar's weakness against other currencies overseas also supported the rupee.
The dollar index, consisting of six major currencies, was up by 0.35 per cent, ahead of tomorrow's US Federal Reserve meeting.
In New York, dollar erased most of its losses on last Friday after the euro briefly jumped following more comments from European Central Bank President Mario Draghi about policy options.
In the last four days, rupee has lost 104 paise against the dollar.
The domestic currency has fallen past the 56-level against the dollar after June 29.
Tracking weak stock markets, the rupee today plunged by 65 paise to 55.97, its lowest closing in over three weeks, against dollar amid fresh Eurozone worries and month-end US currency demand from oil firms.
Dealers said apart from gains in euro and the Asian currencies against the American currency overseas, higher opening in the domestic equity market and selling of dollars by exporters and some banks supported the rupee.
Sensex ended at 17,279 up 94 points or 0.55%
The rupee had ended 79 paise higher to close at 55.15 against the US currency in the previous session on Friday.
In New York, the dollar index climbed to its highest level in about two years on Wednesday.
Weak trends in local stocks with Sensex dropping by 129 points also weighed on rupee but some capital inflows limited its decline to some extent, forex dealers said.
Forex dealers said a higher opening in the stock market also helped the local unit to recover after four sessions of losses.
The dollar strengthened against other currencies as well in the overseas market.
FIIs today pumped in Rs 591 crore in stocks, provisional data from stock exchanges showed.
The rupee resumed higher at the Interbank Foreign Exchange market but fell to a intra-day low of 57.10.
The currency hit a record low of 57.32 on June 22 and has so far shed 7 per cent value against the dollar in 2012, making it worst performing currency in Asia.
The rupee on Tuesday rose by 11 paise to 56.90 against the US dollar in early trade at the Interbank Foreign Exchange market as the American currency weakened against euro and other currencies overseas.
The rupee had lost 10 paise to close at 54.62 on Monday.
On Tuesday, the rupee had closed three paise down at 55.96 against the dollar amid foreign fund outflows and demand of the US currency from importers.
The rupee on Tuesday again breached the 56-level by falling 12 paise to 56.05 against the US dollar in early trade on the Interbank Foreign Exchange on increased demand for the American currency from banks and importers.
The rupee on Monday rose by 5 paise to trade at 55.35 against the US dollar in early trade at the Interbank Foreign Exchange as the American currency weakened against euro overseas.
The domestic currency had ended 12 paise lower at Rs 55.80 against the dollar in Thursday's trade on fresh dollar demand from banks and importers amid a rise in May inflation.
The rupee had ended higher by 12 paise at 55.68 against the dollar in the previous session on fag-end selling of dollars by banks and exporters amid euro gaining strength overseas.
At the Interbank Foreign Exchange market, the domestic unit resumed lower at 54.42 a dollar from overnight close of 54.26 and moved in a narrow range of 54.34 and 54.46.
On Thursday, the local unit had ended higher by 42 paise at 54.94, its highest closing since May 18 against the dollar on sustained FII inflows.
The rupee commenced higher at 55.14 a dollar from the overnight close of 55.36 at the Interbank Foreign Exchange market, and immediately touched a low of 55.30 on some dollar demand from oil importers as crude oil hovered around the $85 per barrel.
The rupee had lost 11 paise to close at 55.65 against the Greenback on Monday due to late dollar demand from importers.
Forex dealers said besides dollar's gains in the overseas markets, a weak opening in the stock market following capital ouflows, also put pressure on the local unit.
Dealers said Euro's gains against the dollar in overseas markets and step taken by the RBI to stablise the rupee mainly influenced the trading sentiment.
Sentiments were weighed down as the US dollar turned higher against its major counterparts.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened lower at 56.02 as against its previous close of 55.64 on dollar buying by importers, mainly oil refiners, to meet their month-end requirements.
This marks a turnaround after rupee's 158-paise plunge in the last three sessions.
The Indian rupee recovered by four paise to 54.99 after touching all-time low of 55.07 against the American currency in the late morning trade due to mild selling of dollars by banks following following measures taken by RBI to curb the local currency's fall.
Forex dealers said fresh dollar demand from banks and particularly, month-end demand from oil importers despite weakness of the dollar in the overseas market pulled down the rupee.
