The rupee fell for the third day in a row to close at fresh 2-1/2-month low of 55.21 against the dollar today, down by 9 paise following sustained dollar demand from importers.
However, firm stock markets and slightly weak dollar overseas amid continued foreign fund inflows capped the fall, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced higher at 55.08 a dollar against previous close of 55.12 and immediately touched a high of 55.01 on strong local stocks and weak dollar overseas.
Emergence of dollar demand from importers, mainly oil refiners, to meet their month-end requirements weighed on the rupee and it fell back to a low of 55.27 before concluding at 55.21, a fall of nine paise or 0.16 per cent.
"The rupee reversed initial gains even after rising risk appetite in stock markets. The oil importers demand also checked the gains in the rupee," Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said.
"The euro was trading slightly lower after the German and eurozone PMI figures continued to remain in contraction territory. The uncertainty prevailing in the eurozone puts pressure on the euro and subsequently on the rupee," India
Forex Advisors Abhishek Goenka CEO said.
The BSE benchmark Sensex today ended higher by 56.96 points or 0.31 per cent.
Foreign Institutional Investors (FIIs) pumped in USD 47.56 million yesterday, as per Sebi data.
The dollar index, a gauge of six major global rivals, was down by 0.04 per cent.