The rupee ended lower by six paise at 65.73 against the US dollar on Monday, largely due to fresh demand for the American currency from banks and importers on the back of higher greenback in overseas markets.
However, foreign capital inflows into the equity markets restricted the rupee's fall against the dollar, forex dealers said.
The rupee opened sharply lower at 65.88 as against last Friday's level of 65.67 at the Interbank Foreign Exchange (forex) market. It moved in a range of 65.8850 and 65.6150 before ending at 65.73, showing a loss of six paise or 0.09%.
The rupee had gained 79 paise, or 1.19%, in the last session on Friday. The dollar index was trading higher by 0.10% against a basket of six currencies in the global market.
In the Asian market, the greenback jumped against its major rivals, with some analysts giving credit to bets that the Federal Reserve will raise interest rates in December, even after standing pat this month.
Oil prices rebounded in Asia trade, but analysts said they remain weighed down by an over-supply and fresh worries about the world economy after the Federal Reserve decided last week against raising interest rates.
Meanwhile, the benchmark BSE Sensex declined by 25.93 points, or 0.10%, to settle at 26,192.98.