Foreign institutional investors sold domestic shares worth USD 8.36 million (Rs 45.41 crore), according to provisional BSE data.
Foreign institutional investors had pumped in $132.5 million (Rs 717.89 crore), according to provisional BSE data.
The dollar index recovered its early losses and was trading up by 0.11 per cent against a basket of six major rivals.
The rupee had lost 23 paise to end at 54.09 in Tuesday's trade due to month-end dollar demand.
Forex dealers said euro's gains against the American currency in the overseas market also supported the rupee.
Sustained foreign funds did manage to arrest the fall to some extent.
Forex dealers said sustained foreign fund flows also aided the trading sentiment in rupee's favour.
Weak dollar in the overseas market also boosted the rupee value against the dollar, a forex dealer said.
A higher opening in the domestic equity market and the strengthening of euro and yen against the dollar overseas also aided the rupee, dealers said.
Strength in dollar against some other currencies overseas weighed on the rupee
Forex dealers said sustained selling of the American currency by exporters and bullish local equity markets buoyed the rupee sentiment.
Besides, a higher opening in the domestic equity market and strengthening of euro and yen against the American currency overseas supported the rupee, forex dealers said.
The rupee also recovered against the pound sterling to 87.01 from overnight close of 87.20 and also recouped losses against the euro to 69.66 from 69.84.
Sustained dollar sales by exporters and banks and a higher opening in the equity market also boosted the rupee sentiment, forex dealers said.
Dealers said besides increased dollar selling by exporters, a higher opening in domestic equity market and yen's gain against the American currency overseas helped the rupee to recover.
Nifty futures traded in Singapore were trading down 0.8 percent in line with other emerging Asian markets.
Weak domestic shares and foreign institutional investors' selling about 39 billion rupees of index futures in the last four trading sessions weighed on the rupee, dealers said.
At the Interbank Foreign Exchange market, the domestic currency commenced weak at 55.68 a dollar from Monday's close of 55.57 against the dollar.
At the Interbank Foreign Exchange market, rupee opened weak at 55.57 from last Friday's close of 55.50.
Fresh demand for the American unit from importers put pressure on the rupee.
Falling for the first time in three days, the rupee washed out initial gains to end four paise lower at 62.57 today on caution ahead of US non-farm payrolls data and sustained capital outflows from Indian markets.
Forex dealers said a higher opening in the domestic equity market also supported the rupee.
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.
Sustained month-end demand from banks and importers weighed.
The rupee had gained 90 paise, or 1.34 per cent.
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.
The Rupee on Thursday breached the 49-mark against the US dollar and fell by 52 paise in early trade following increased capital outflow by foreign funds due to melting stock markets.
The rupee on Monday dropped by 30 paise to 54.72 against the US dollar in late morning trade, due to on fresh demand for the American currency from banks and importers despite a weak global trend.
Forex dealers said besides dollar weakening against the euro in overseas markets, higher opening in the equity market and increased foreign funds inflows mainly supported the rupee.
The rupee on Monday appreciated by 11 paise to 54.64 against the US dollar in early trade at the Interbank Foreign Exchange, aided by selling of the American currency by exporters and banks.
Forex dealers attributed the rupee's fall to increased dollar demand from importers amidst rising global crude prices
The Indian rupee on Monday appreciated by 16 paise against the American currency in early trade on hopes of increased capital inflows from foreign funds boosted by last week's rally in the stock markets.
The rupee on Monday fell by 40 paise to 59.96 in early trade on the Interbank Foreign Exchange market, weighed down by dollar's gains against other currencies in global markets.
The rupee had ended 47 paise higher at 60.14 against the US currency in the previous session.
Forex dealers said besides continued demand for the American currency from importers, increased capital outflows by foreign funds kept pressure on the rupee.
Dealers attributed the rupee's fall to increased demand.
The rupee had gained 18 paise to 55.43 against the dollar in Monday's trade.
The fall would have been much more pronounced, had there not been sustained capital inflows worth of over $100 million in equities, forex dealers said.
Dealers said besides higher opening in local equities and selling of the US currency by exporters, euro's gains against the American currency on positive developments in Greece supported the rupee.
The rupee on Monday gained for the first time in three days and closed up 12 paise to 62.56 against the dollar on fag-end sales of the US currency.
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