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The rupee fell from a two-week high to close three paise lower at 59.34 against the dollar, failing to sustain gains driven by the easing of FDI norms in various sectors and the RBI's liquidity-tightening measures.
Late dollar demand from importers, a strengthening dollar overseas and capital outflows also weighed on the rupee, a forex dealer said.
The rupee moved in a range of 52 paise on alternate bouts of demand and supply, with confusion over the sustainability of the currency's stability after the Reserve Bank of India on Monday announced measures to address exchange rate volatility.
At the Interbank Foreign Exchange Market, the rupee opened at 59.14 to a dollar from the previous close of 59.31 and rallied to a two-week high of 59.05 on the back of firm local equities amid sustained dollar selling by exporters.
The rupee later fell to a low of 59.57 on renewed dollar demand from importers and firm dollar overseas before recovering some ground to end at 59.34, a drop of three paise. Yesterday, it had gained 58 paise, or 0.97%, following the RBI's measures.
The benchmark S&P BSE Sensex today rose 97.5 points, or 0.49%. Foreign institutional investors sold Rs 357.40 crore of shares yesterday, as per provisional data with the stock exchanges.
The dollar index was up 0.04% ahead of testimony from the head of the Federal Reserve.
