The rupee on Tuesday lost six paise to register its two-week closing low of 60.23 against the dollar on sustained dollar demand from importers.
A firm overseas and capital outflows also weighed on the rupee, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced sharply lower at 60.34 a dollar from last weekend's close of 60.17.
The rupee later recovered on dollar selling by exporters to a high of 60.20 before settling at 60.23, still showing a fall of six paise or 0.10% from its previous close.
The BSE benchmark Sensex on Tuesday tumbled by over 144 points or 0.64%.
Foreign Institutional Investors (FIIs) turned net sellers and sold shares worth $68.81 million last Friday, as per Sebi data.
Forward dollar premium remained weak.
The benchmark six-month premium payable in September traded at 227-229 paise from last close of 230.5-232.5 paise.
Far forward contracts maturing in March, 2015 ended at 466.5-468.5 paise from 472.5-474.5 paise.
The Reserve Bank of India fixed the reference rate for dollar at 60.26 and for the euro at 83.27.
The rupee fell back slightly against the pound to 100.72 from 100.62 previously.
However, it recovered to 59.13 per 100 Japanese yen from 59.35 and also rebounded to 83.12 per euro from 83.49.