The local currency started the day's trading on a weaker note at 60.11 and dropped further to a low of 60.245 at the Interbank Foreign Exchange (Forex) market.
Later, some dollar selling by exporters amid firm local equities helped the rupee recover to a high of 60.07 before settling at 60.12, still showing a fall of five paise, or 0.08 per cent from previous closing of 60.07. Yesterday, it had dipped by 14 paise or 0.23 per cent.
The rupee moved in a range of 60.07-60.24 during the day.
"Rupee continued to trade range bound to end slightly weaker than its previous close. At present, the dollar index is trading near yesterday close. During the day rupee got support from the local equities which traded positively and gained by almost one per cent to end the day," Veracity Group CEO Pramit Brahmbhatt said.
The trading range for the spot rupee is expected to be within 59.60 to 60.60, he added.
The dollar index was down by mere 0.01 per cent against its six major global rivals.
Meanwhile, the BSE benchmark Sensex today bounced back by 221.67 points or 0.89 per cent to 25,228.65.
FIIs/FPIs sold shares worth Rs 3.40 crore, as per provisional data.
"Indian rupee was seen trading weak taking cues from its Asian peers today as dollar gained strength against a majority of currencies due a recovery in the US treasury yields. Janet Yellen's congressional testimony, scheduled after the market hours would be seen giving further direction to the pair," said Abhishek Goenka, founder & CEO, India Forex Advisors.
"Technically, rupee is seen trading in the range of 59.75- 60.20 levels. A break out of this range would be crucial for the pair," he added.
Meanwhile, the premium for forward dollar closed mixed.
The benchmark six-month premium payable in December ended a tad lower at 232.5-234.5 paise from 233.5-235.5 paise. Far-forward contracts maturing in June, 2015, however, rose to 476-478 paise from 472-474 paise.
The Reserve Bank of India fixed the reference rate for dollar at 60.2195 and for the euro at 81.9510.
The rupee declined further against the pound to 103.16 from overnight close of 102.80 while edged up to 81.85 per euro from 81.86.
It also softened to 59.18 per 100 Japanese yen from 59.19.