FIIs pumped in nearly Rs 340 crore in stocks today as perprovisional data on stock exchanges.
The rupee had ended 79 paise higher to close at 55.15 against the US currency in the previous session on Friday.
The US dollar index, which tracks the greenback against a basket of six major currencies, was 0.38 per cent lower at 95.41.
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.
Fresh demand for dollars from banks and importers in view of firm dollar in the overseas market mainly affected the rupee value against the US unit, a forex dealer said.
The rupee plunged to nearly 33-month low of sub-52 level after losing a whopping 81 paise against the United States currency on sustained dollar demand amid weak trends in stock markets and deepening euro-debt crisis.
The NSE Nifty too ended 58.60 points, or 0.54 per cent, higher at 10,967.30 after shuttling between 10,985.15 and 10,928 during the session.
Stock markets opening with losses too put pressure on the domestic unit.
The dollar index surged to multi-year high.
Forex dealers said a higher opening in the domestic equity market also supported the rupee.
Sustained month-end demand from banks and importers weighed.
The rupee had gained 90 paise, or 1.34 per cent.
Strength in dollar against some other currencies overseas weighed on the rupee
Besides selling of dollars by exporters, strength in other currencies against the American unit overseas also supported the rupee.
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.
Forex dealers said increased demand for the dollar from importers also put pressure on the rupee.
A weakening dollar against other currencies overseas supported the rupee.
Forex dealers attributed the rupee's fall to increased dollar demand from importers amidst rising global crude prices
In the global market, dollar fell against most of its rivals on Monday.
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.
The dollar index was down by 0.02 per cent against a basket of six major currencies.
Fresh demand for the American unit from importers put pressure on the rupee.
On Tuesday, the rupee had gained 10 paise to close at 66.52.
Forex dealers said besides robust month-end demand for the American currency from oil importers, dollar's strength against its rival currencies on expectations of rising interest rates amid lingering Sino-US trade tensions, weighed on the domestic currency.
Fresh demand for the American unit from importers put pressure on the rupee.
In New York, the dollar fell against other major currencies on Monday after a December reading on the US services sector came in below market expectations.
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.
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.
There was sustained selling of the American currency by exporters ahead of a decision of US Federal Reserve on tapering its monetary stimulus.
Rupee gained on fresh selling of dollars by banks ahead of the RBI policy meeting.
Weakness in the dollar against some other currencies overseas, supported the rupee
Appreciation of the dollar overseas amid a lower opening in the domestic equity market affected the rupee
On Tuesday, the rupee had declined marginally by 3 paise to 66.03.
A higher opening in domestic stock market supported the rupee.
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.
A higher opening in the domestic equity market and a weak dollar against other currencies overseas on a string of disappointing US data last week also supported the gain in the rupee
Weakening of the dollar against other currencies overseas, following disappointing economic data and a higher opening in the domestic equity market, supported the rupee.
The dollar index, a gauge of six major currencies, was down by 0.13 per cent as it lost ground against the euro following a better-than-expected survey of German sentiment.
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.
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