The Indian rupee commenced weak at 60.23 a dollar from last close of 60.12 at the Interbank Foreign Exchange (Forex) market and declined further to a low of 60.28 on sustained dollar demand from importers.
A firm dollar overseas too dampened the rupee sentiment in early stages.
In New York market yesterday, the dollar rallied after the head of the Federal Reserve suggested the central bank could accelerate plans to raise interest rates if jobs market continues to improve more rapidly than anticipated.
However, Fed Chairperson Janet Yellen, speaking before Senate Banking Committee, also said that time has not yet arrived, given the "considerable uncertainty" surrounding the economic outlook.
The dollar index was quoting up by 0.19 per cent today against its major global rivals.
Later, the rupee recovered to a high of 60.09 on sharp rally in local stocks and dollar selling by exporters at the fag end. However, it finally closed at 60.12 versus dollar.
Yesterday, the rupee had fallen 5 paise and the day before there was a dip of 14 paise.
India's exports growth remained in double digit for the second month in a row in June at 10.22 per cent but spurt in gold imports marginally pushed the trade deficit to USD 11.76 billion.
The equity benchmark Sensex today shot up further by 321 points, or 1.27 per cent, to end at one-week high.
FIIs sold shares worth Rs 3.40 crore yesterday, as per provisional data.
Pramit Brahmbhatt, Veracity Group CEO said: "Rupee continued to trade range bound to slightly weak as dollar demand from state run banks for oil importers and defence related payments nullified the upward movement of local equities. The trading range for the Spot rupee is expected to be within 59.60 to 60.60."
"Commencing the session on a weaker note against the USD, rupee was seen trading on a flat note today. The initial weakness in the rupee was mainly attributed to the strength in the dollar, falling euro and weak Asian currencies. However later during the session, it was seen appreciating amid Firm equity markets and positive exports numbers. Technically, USDINR continues to trade in the range of 59.90-60.30," said Abhishek Goenka, Founder and CEO, India Forex Advisors.
Meanwhile, the premium for forward dollar softened on fresh receipts by exporters.
The benchmark six-month premium payable in December fell further to 231-233 paise from 232.5-234.5 paise previously. Far-forward contracts maturing in June, 2015 softened to 475-477 paise from 476-478 paise.
The Reserve Bank of India fixed the reference rate for dollar at 60.1903 and for the euro at 81.6560.
The rupee recovered against the pound to 102.92 from last close of 103.16 while improved further to 81.35 per euro from 81.85. It rose to 59.08 per 100 Japanese yen from 59.18.