The rise in dollar index, a gauge of six major global rivals, was up 0.13 per cent, also led to rupee closing lower.
At the Interbank Foreign Exchange (Forex) market, the local unit commenced lower at 62.35 a dollar from previous close of 62.20. It then dropped further to a low of 62.45 on initial dollar demand from exporters.
Later, it bounced back to a high of 62.2050 before ending at 62.23, showing modest fall of three paise or 0.05 per cent.
The Indian benchmark S&P BSE Sensex today tumbled over 186 points, or 0.90 per cent, while FIIs injected USD 113.41 million on Tuesday, as per Sebi data.
Pramit Brahmbhatt, CEO, Alpari Financial Services, India said: "Local equities traded weak after rising for four days as profit booking was seen in bluechips. US dollar traded strong against the Australian dollar after the preliminary reading of China's manufacturing data from HSBC disappointed investors.
"This helped Dollar index to trade positive for the second consecutive day. Rupee traded flat today and closed near previous close. The trading range for the rupee is expected to be within 61.80 to 63.00," he added.
Forward dollar premiums dipped on sustained export receipts.
The benchmark six-month forward dollar premium payable in July tumbled to 229-231 paise from 234-236 paise previously.
Far forward contracts maturing in January also plunged to 473-475 paise from 479-481 paise.
The RBI fixed the reference rate for the dollar at 62.2843 and for the euro at 85.6995.
The rupee, however, recovered to 103.61 against the pound from 103.87 while improved further to 85.21 per euro from 85.40. It, remained weak against the Japanese yen to end at 61.05 per 100 yen from 60.73.