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Forex dealers said, however, sustained foreign fund flows capped rupee's fall to some extent.
The domestic currency commenced the day strong at 52.96 from yesterday's close, when it had hit an over three-and-a- half-month high of 53.13.
At the Interbank Foreign Exchange (Forex) market, it hovered in a narrow range of 52.89-53.26, before settling down at 53.13, a loss of three paise, or 0.06%.
Foreign institutional investors pumped in $92.03 million (Rs 489.27 crore) into local stocks, according to BSE provisional data.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The rupee reversed early gains towards the end of session tracking risk aversion in global markets. The dollar demand at lower levels also limited the strength in rupee".
The euro fell by 0.4% to 1.3528 toward a one-week low versus the dollar as European Central Bank policymakers prepare to meet tomorrow amid political and banking turmoil that threatens to renew the region's sovereign-debt crisis.
"The slight recovery in the euro above 1.35 levels made the rupee to appreciate initially. The weakness in the euro and Negative stock markets added more pressure on the rupee," said Abhishek Goenka, Founder and CEO, India Forex Advisors.
The dollar index, a barometer of six major global rivals, was up by 0.25%.
Meanwhile, the BSE benchmark Sensex closed 20 points down at 19,639.72.
