The domestic currency had gained a healthy 220 paise in the last seven trading sessions.
At the Interbank Foreign Exchange (forex), the rupee opened on a firm note at 70.48 against the US dollar. It gained further ground to hit a high of 70.30, following dollar selling by exporters.
The local unit, however, pared the initial gains and finally settled the day at 70.87 to the US dollar, down 18 paise over its previous close.
The forex market was closed Friday on account of Guru Nanak Jayanti.
"The rupee appears to have put in a medium-term bottom, driven by the sharp drop in crude oil, a decline in foreign selling and improving prospects for the domestic economy," said Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management.
Meanwhile, foreign institutional investors (FIIs) made fresh purchases worth Rs 627.4 million Monday, as per provisional data.
Traders said bullish trend in the equity market as well as easing crude oil prices restricted the rupee's fall.
Brent crude was trading at USD 59.64 per barrel.
Meanwhile, the 30-share Sensex settled 373.06 points, or 1.07 per cent, higher at 35,354.08. While, the broader NSE Nifty jumped 101.85 points, or 0.97 per cent, to finish at 10,628.60.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.7144 and for rupee/euro at 80.2660. The reference rate for rupee/British pound was fixed at 90.6478 and for rupee/100 Japanese yen was 62.47.