The Indian rupee breached the crucial 40-level and traded at 40.02/03 against the US currency in late morning deals as Asian equity markets turned sluggish amid firm greenback in overseas market.
In quiet trade at the Interbank Foreign Exchange (forex) market, the local currency traded in a small range of 40.01 and 40.03 after resuming almost steady at 39.96/98 a dollar against its last close of 39.96/97 a dollar.
The rupee was trapped in an extremely small range mainly because of weak equity markets, forex dealers said.
The Bombay Stock Exchange benchmark Sensex was down by 206 points in early trade.
Asian markets were sluggish during morning trade.
In overseas markets, the dollar firmed up against the euro on Monday, ahead of a meeting of the European Central Bank and the group of seven leading industrial nations this week.