The domestic currency came under pressure as the pace of foreign buying in domestic shares has slowed, even as indexes edged higher to record highs on Tuesday. Meanwhile, in debt markets foreign investors have been net sellers over the previous two weeks.
Traders said the near-term outlook for the rupee will depend on the movement of these foreign fund flows, as well as global developments, especially lingering tensions in Ukraine and continued concerns about China's economy.
"The flows into equity and debt markets have slowed in April. Their momentum going ahead will be crucial as also the development in Ukraine," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.
"The rupee is likely to trade in a 60.40 to 61.25 range in the rest of the week."
The partially convertible rupee closed at 60.76/77 per dollar compared with 60.59/60 on Monday. The unit fell as low as 60.89, its lowest level since March 21, continuing its retreat from an eight-month high of 59.5950 in early April.
Indian shares ended flat after hitting record highs for a second consecutive session as momentum waned ahead of the expiry of monthly derivative contracts and on expectations that current levels sufficiently price in fundamentals.
Foreign investment inflows have slowed from the strong pace seen at the start of the year. Overseas investors were net sellers of stocks in three of the last five trading sessions with total inflows in April standing at $1.2 billion.
Meanwhile, emerging Asian currencies eased on Tuesday as China's yuan fell to its weakest in 14 months, with the Indonesian rupiah at a near seven-week low.
In the offshore non-deliverable forwards, the one-month contract was at 61.17 while the three-month was at 61.95.