The rupee declined 20 paise to close at 82.85 (provisional) against the US dollar on Tuesday, pressured by month-end dollar demand from importers and foreign capital outflows.
At the interbank foreign exchange market, the rupee opened lower at 82.71 against the greenback and witnessed an intraday high of 82.69 and a low of 82.87.
It finally settled at 82.85, down 20 paise over its previous close of 82.65.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.27 per cent lower at 104.02.
Global oil benchmark Brent crude futures rose 0.83 per cent to USD 84.62 per barrel.
The 30-share BSE Sensex ended 361.01 points or 0.60 per cent higher at 60,927.43, while the broader NSE Nifty climbed 117.70 points or 0.65 per cent to 18,132.30.
Foreign Institutional Investors (FIIs) were net sellers in capital markets on Monday as they sold shares worth Rs 497.65 crore, according to exchange data.
"Month-end dollar demand from oil importers and year-end rebalancing foreign fund outflows weighed on the Indian rupee in Tuesday's trade as it surrendered Monday's gain. The surge in crude and precious metal prices also weighed on the local unit," said Dilip Parmar, Research Analyst, HDFC Securities.
The rupee has been stuck in the range of 82.40 to 82.90, lacking the directional move ahead of the year-end.
"In the near term, the rupee is expected to trade between 82.40 to 82.90 against the dollar. The bias for the local currency remains weak as long as it trades below 82.40," Parmar added.
According to an official announcement on Monday, China will scrap quarantine for international travellers from January 8 next year, as it reopens its international borders and comes out of international isolation after nearly three years.