The Indian rupee's decline was limited by a rally in local stocks, which took the key BSE Sensex index to a new closing high, and continued foreign fund inflows.
It was the second month of gains for the rupee, which rose 1.8 per cent in October after appreciating 4.7 per cent in September. The local currency has recovered since dropping to all-time low of 68.85 on August 28.
The rupee opened lower at 61.37 a dollar on the interbank foreign exchange market from the previous close of 61.23 and touched the day's high of 61.29.
Later, it dropped to 61.56 before settling at 61.50, a fall of 27 paise or 0.44 per cent. In the past two days, the rupee had risen 29 paise to the highest level in more than two weeks.
Month-end dollar buying from importers, mainly oil refiners, weighed on the rupee.
The dollar index was up 0.26 per cent against major global rivals after the Federal Reserve yesterday held its monetary policy steady, in line with expectations.
"The rupee was seen weakening after the Fed announced that they will continue with the current pace of QE (quantitative easing) but gave a slight hint that they may taper in the month of December. This fuelled gains in the dollar and made the rupee depreciate," said Abhishek Goenka, CEO of India Forex Advisors. "The Fed Chairman said that they want to see some more data before making changes to the current QE program."
The 30-share benchmark S&P BSE Sensex rose 130.55 points, or 0.62 per cent, to a record close of 21,164.52. Overseas investors were net buyers of Indian stocks for the 19th straight session, picking up Rs 1,016.77 crore of shares yesterday, according to provisional data with the stock exchanges.
Forward dollar premiums remained weak on continued receipts from exporters.
The benchmark six-month forward dollar premium payable in March dropped further to 195-197-1/2 paise from 205-207 paise and far-forward contracts maturing in September dipped to 422-1/2-424-1/2 paise from 432-434 paise previously.
The RBI fixed the reference rate for the dollar at 61.4100 and for the euro at 84.1245.
The rupee ended at 98.60 against the pound from 98.39 and declined to 62.60 per 100 Japanese yen from 62.34. It improved to 84 per euro from 84.26.