The rupee today retreated from its one-month high to end lower by 15 paise to 63.93 a dollar on overwhelming demand for the American currency from corporates and banks.
The ruppe traded under pressure in view of strengthening US dollar following easing geopolitical tensions in the Korean peninsula and also abating concerns over Hurricane Irma which subsided over the weekend.
Heavy capital outflows also weighed on the rupee trade.
Currency traders also turned cautious ahead of key macro data releases including IIP and inflation numbers.
The home currency experienced a stunning rally last week.
In the meantime, country's forex reserves surged by a massive USD 3.572 billion to touch a record high of USD 398.122 billion for the week ended September 1, on account of rise in foreign currency assets, RBI data showed.
Breaking a stellar three-day upsurge, the local unit resumed sharply lower at 63.91 as against last Friday's close of 63.78 at the forex market.
It was later tucked in a narrow range -- 63.8350 and 63.9450 -- before ending at 63.93, revealing a steep loss of 15 paise, or 0.24 per cent.
The home unit had appreciated a good 34 paise in the last three days.
The dollar strengthened across the board after posting its biggest weekly drop in two months as a decline in risk aversion spurred some investors to cover their short positions before US inflation data later this week.
The RBI, meanwhile, fixed the reference rate for the dollar at 63.8664 and for the euro at 77.0357.
The dollar index, which measures the greenback's value against a basket of six major currencies, was sharply down at 91.59.
In cross-currency trades, the rupee remained under pressure against the pound sterling and settled at 84.48 from 84.28 per pound, but recovered against the Euro to finish at 76.69 from 76.92.
The local unit also bounced back against the Japanese yen settle at 58.86 per 100 yens from 59.39 earlier.
Foreign investors and funds pulled out close to Rs 3,000 crore from equities in the first week of this month amid "lacklustre earnings season" as well as lingering tensions between the US and North Korea.
Domestic bourses witnessed a new breakout phase after their recent consolidation phase on optimistic buying in frontline heavy-weights along with key auto stocks.
Global bourses were largely positive after the perceived threat of a North Korean missile test at the weekend failed to materialise.
The BSE benchmark Sensex jumped nearly 195 points to end at 31,882.16, while Nifty surged over 71 points to settle at 10,006.05.
In forward market today, premium for dollar showed an easy trend due to lack of market moving factors.
The benchmark six-month premium payable in February edged marginally higher at 126-127 paise from 125.50-127.50 paise and the far forward August 2018 contract also inched up to 266.50-267.50 paise from 264.50-266.50 paise yesterday.
On the international energy front, crude prices edged lower on concerns that Hurricane Irma's pounding of heavily populated areas of Florida could dent oil demand in the world's top oil consuming nation.
However, losses were capped by weekend talks between Saudi Arabia's oil minister and counterparts over a possible extension to a pact to cut global oil supplies beyond next March.
Brent crude oil futures for November delivery were down 33 cents at USD 53.45 a barrel while benchmark US West Texas Intermediate crude advanced by 22 cents to USD 47.70.