The domestic currency had closed at a fresh three-month high overnight, largely outperforming several emerging market currencies since the beginning of this year.
Renewed dollar demand from importers and corporates in the face of bullish dollar sentiment overseas predominantly added pressure on the local currency.
Suspected intervention by the Reserve Bank of India in the foreign exchange market to stem the rupee appreciation, which impacts export competitiveness, also weighed on trade, said a forex dealer.
Expert opinions were divided if the RBI Governor-led panel will recommend cut in interest rate by 0.25 per cent to give fillip to growth or maintain status quo because of inflationary pressure from rising oil prices.
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Meanwhile, the greenback staged a dramatic recovery against the major currencies in late Asian trade -- its biggest advance in nearly three weeks in the midst of growing speculation about an imminent Fed rate hike.
The domestic unit resumed lower at 67.29 from Monday's closing value of 67.22 at the foreign exchange (forex) market.
The rupee had appreciated by a whopping 98 paise in nine-day upsurge.
In worldwide trade, the Pound plummeted amid broad dollar's strength and also undermined by sluggish UK macro data.
The US dollar index was trading firmly higher at 100.56 in late afternoon session.
The RBI fixed the reference rate for the dollar at 67.3692 and for the euro at 72.0716.
In cross-currency trade, the rupee continued rally against the British pound to finish higher at 83.33 from 83.77 per pound and surged further against the euro to close at 71.93 from 72.15 earlier.