At the Interbank Foreign Exchange (Forex) market, the rupee commenced higher at 59.10 a dollar from its previous close of 59.17. It later improved further to a high of 58.98 on bullish local equities.
However, the rupee met with strong resistance and dropped to a low of 59.23 on late dollar demand from importers before closing at 59.20, showing a fall of 3 paise or 0.05 per cent.
In the previous three sessions, it went up by a total 21 paise in thin trade.
"We now look for USD-INR to be at 60 by year-end 2014 (from 62), although FX policy is likely to impede INR strength . The new government's strong mandate has given rise to optimism for reforms that could unlock economic potential," wrote Paul Mackel, Head of Asian FX Research, HSBC.
The dollar index was up by 0.14 per cent against a basket of six major global rivals. Traders said this put further pressure on the rupee.
Pramit Brahmbhatt, Veracity Group CEO said: "Not much movement was seen in currency market as some of the major countries markets were closed. On the occasion of queens birthday, Australian banks were on bank holiday whereas European countries and Switzerland were also closed. In the absence of major economic data, rupee ended near previous close. The trading range for the Spot USD/INR pair is expected to be within 58.80 to 59.80."
Continuing its record breaching spree, the Indian equity benchmark S&P BSE Sensex today shot up by 183.75 points to end at new peak while FIIs injected Rs 1,283.04 crore last Friday, as per provisional data with stock exchanges.
The premium for forward dollar improved further on sustained payments from banks and corporates.
The benchmark six-month premium payable in November firmed up to 249-251 paise from last Friday's close of 243.5-245.5 paise.
Far-forward contracts maturing in May, 2015 also rose to 505-507 paise from 494-496 paise.
The Reserve Bank of India fixed the reference rate for dollar at 59.0605 and for the euro at 80.6160.
The rupee recovered slightly against pound to 99.47 from 99.54 previously 99.42 and also rebounded against the euro to 80.56 from 80.73. It, however, improved further to 57.78 per 100 Japanese yen from 57.81.