Rupee pared its initial losses and was trading flat at 67.36, against the US currency in late morning trade on bouts of month-end dollar demand from banks and importers amid lower dollar overseas.
The rupee opened lower by 6 paise at 67.41 as against yesterday's closing level of 67.35 per dollar at the Inter-bank Foreign Exchange (Forex) market.
The domestic unit hovered in a range of 67.43 to 67.35 during the morning deals before quoting at 67.37 per dollar at 1025 hrs.
The dollar index was trading down 0.22 per cent at 97.05 against a basket of six currencies in early trade.
Overseas, the dollar slipped ahead of the US Federal Reserve's two-day policy meeting that begins later today, while the yen gained despite expectations that the Bank of Japan will ease it later this week.
Oil prices edged away from three-month lows at Asia trade, supported by a weaker dollar, but concerns of ongoing oversupply weighed on markets and many traders are raising their bets on further price falls.
Meanwhile, the benchmark Sensex was also trading flat, marginally up 5.46 points, or 0.02 per cent, to 28,089.88 at 1030hrs.
The US dollar strengthened slightly against the pound
yesterday, as the British currency sold off sharply, extending its fall to fresh multi decade lows while it softened against the euro.
Foreign funds remained net sellers for the third day and sold shares worth a net Rs 606.34 crore, as per exchanges data.
The flagship BSE Sensex dropped further by 254.91 points or 0.91 per cent to close at 27,836.51 while broader Nifty moved down 76.05 points or 0.88 per cent to end at 8,615.25.
In the forward market, premium for dollar continued trade weak on sustained receiving by exporters.
The benchmark six-month premium for March softened to 147.5-149.5 paise from 150.5-152.5 paise yesterday and the forward-September 2017 contract also moved down further to 323-325 paise from 326-328.
