In a little amount of trading on Thursday, the rupee crept up 2 paise to close at 83.20 (provisional) versus the US dollar, helped by a decline in the price of crude oil and the dollar.
However, advances in the rupee were constrained, according to FX traders, by foreign money outflows and losses in domestic stocks.
In day trading, the rupee fluctuated between 83.25 and 83.13 versus the US dollar after opening flat at 83.22.
The local currency gained 2 paise from the previous close to conclude at 83.20 versus the US dollar. Following a lackluster trading day, the rupee had finished at 83.22 on Wednesday.
While this was going on, the dollar index, which measures the strength of the dollar against a basket of six other currencies, fell by 0.27 percent to 106.38 following overnight trading, when it had reached a nearly 10-month high of 106.84.
The benchmark for world oil, Brent crude, fell 0.57 percent to USD 96 per barrel.
According to analysts, the local currency is suffering as a result of FIIs continuing to sell in Indian capital markets due to the combination of increasing interest rates and US bond yields.
The 30-share BSE Sensex dropped 610.37 points or 0.92 percent to close at 65,508.32 on the domestic market front. The larger Nifty fell 192.90 points, or 0.98 percent, to finish at 19,523.55.
According to exchange statistics, Foreign Institutional Investors (FIIs) sold shares worth Rs 354.35 crore on Wednesday, making them net sellers in the capital market.