The rupee pared some initial losses, to trade lower by 7 paise at 68.07 against the American currency in late morning deals on sustained dollar demand from importers and banks, despite lower local equities.
The rupee recovered from a fresh 16-month low of 67.08 against last Friday's closing level of 68.00 per dollar at the inter-bank foreign exchange here.
Later, it regained its lost ground to trade flat at 68 before falling again in late morning deals; it was trading at 68.07 per dollar at 1030 hrs.
The domestic unit hovered between 68.00 and 68.15 during morning deals.
"Sustained capital outflows, higher dollar overseas after easing trade war tension's loomed over rupee," a dealer said.
Meanwhile, the US dollar rose against basket currencies in early Asian trade after US Treasury Secretary Steven Mnuchin said the US trade war with China was on hold.
The 30-share BSE Sensex fell by 55.04 points, or 0.16 per cent, at 34,793.26 at 1050 hrs.