Renewed dollar demand from importers weighed on the rupee and it fell back to a low of 63.97 before recovering some ground to end at 63.50, a fall of 12 paise or 0.19 per cent.
In the previous five sessions, the local currency had jumped 425 paise, or 6.28 per cent, amid optimism pegged on steps to rescue the battered financial markets announced by RBI Governor Raghuram Rajan, who took over on September 4.
The benchmark S&P BSE Sensex tumbled 215.57 points or 1.08 per cent ahead of data on industrial production and retail inflation.
"The markets should see a somewhat range-bound stable rupee until the Federal Open Market Committee meets next week to discuss whether it should scale down its bond buying program," said Raghu Kumar, co-founder of RKSV.
"As we have evidenced over the past month, there is a strong correlation between the equity markets and the rupee."
Foreign institutional investors continued their buying spree, with net share purchases amounting to Rs. 930.54 crore today and Rs. 586.50 crore yesterday, according to provisional data with the stock exchanges.
"The trading range for the spot USD-INR pair is expected to be within 63.00 to 64.50," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).