The rupee slipped from its initial gains by 7 paise to 66.56 against the American currency in late morning deals following bouts of dollar demand from importers amid volatile equities.
The domestic currency today resumed lower at 66.52 as against yesterday's closing level of 66.49 at the Interbank Foreign Exchange (Forex) market.
Later, it gained slightly to 66.46 on bouts of dollar selling by exporters before slipping back to quote 66.56 at 1030 hrs.
The rupee was hovering in a range of 66.5650 and 66.46 in the morning trade.
Globally, the US dollar nursed broad losses against the basket currency in early trade in New York, having retreated from a multi-month peak as bulls got cold feet after US manufacturing contracted in November for the first time in three years.
Meanwhile, the benchmark BSE Sensex was trading lower by 93.52 points, or 0.36 per cent, to 26,075.89 at 1050 hrs.
Meanwhile, foreign portfolio investors (FPIs) turned net
buyers once again and bought shares worth a net Rs 259.90 crore yesterday, as per provisional data released by stock exchanges.
On the global front, the dollar slipped to a fresh two-week low against a basket of major currencies after a mixed bag of US economic data once again raised concerns over whether the Federal Reserve will hike interest rates in June amid some caution ahead of US jobs report this weekend.
The dollar index, which tracks the world's reserve currency against a basket of its peers was trading at 95.36, down 0.05 per cent.
In forward market, premium for dollar moved down due to sustained receivings from exporters.
The benchmark 6-month premium for November edged down to 200-202 paise from 204-206 paise and far forward May 2017 contract also declined to 392-394 paise from 395-397 paise yesterday.
Oil prices held broadly steady ahead of an OPEC meeting in Vienna, although there were few expectations that the cartel would announce any significant cuts to output.
Brent crude, the global benchmark, was trading 0.4 per cent higher at USD 49.92, while West Texas Intermediate, the US market, was 0.3 per cent stronger at USD 49.16.
In the meantime, Indian financial markets rallied for the second straight day and closed at 2016-closing high in a late rally spurted by index heavyweights.
The Sensex jumped over 129 points to end at 26,843.14 while the broader Nifty reclaimed the key psychological 8,200-mark by gaining 39 points to 8,218.95.
