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.
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.
Loans make money for the lender in the initial years but losses come later when they turn bad.
In addition, dollar's weakness against other currencies overseas also supported the rupee.
The rupee hovered in a range of 53.85-54.24 per US dollar during the day.
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.
The rupee had ended 79 paise higher to close at 55.15 against the US currency in the previous session on Friday.
Forex dealers said a higher opening in the stock market also helped the local unit to recover after four sessions of losses.
FIIs today pumped in Rs 591 crore in stocks, provisional data from stock exchanges showed.
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.
Forex dealers said, however, a firm dollar capped rupee's rise to some extent.
The dollar index was trading marginally higher by 0.06 per cent.
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 resumed lower at 64.20 per dollar.
Both central banks targeted interbank rates to control the supply of money, aiming for a more surgical monetary tool than orthodox bank reserves or policy interest rates.
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.
In the global market, dollar fell against most of its rivals on Monday.
The rupee had hit a record low of 68.85 in August 2013.
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Demand for the dollar from importers weighed on the local currency.
Persistent selling of the American currency by exporters and bank supported the rupee
It hovered in a range of 63.57 and 63.70.
Weakness in euro against the dollar weighed on the rupee.
The Bombay Stock Exchange, the National Stock Exchange, the interbank foreign exchange market and overnight call money/government securities market will remain closed on Wednesday.
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.
The domestic unit closed higher by 11 paise at 66.56 in Wednesday's trade.
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.
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.
Forex dealers said besides strong demand for the American currency from importers, capital outflows mainly weighed on the domestic currency.
The rupee had dropped 18 paise against the dollar on Thursday.
The domestic unit hovered in a range of 66.45 and 66.61 per dollar during the day.
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In global markets, the dollar declined against key rivals in early trade as investors weighed the prospects for a continuation of monetary stimulus from the US Federal Reserve.
The rupee lost 37 paise to end at 62.60 against the dollar on Tuesday following demand for the US currency and a fall in local equities on further rate hike concerns.
The domestic unit had lost 7 paise to close at 66.87 in Tuesday'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.
