The rupee gave back most of its initial gains in tandem with local equities and settled almost flat at 64.53 against the US currency following fag-end dollar demand from importers and banks.
Forex markets sentiment took a sudden U-turn as currency traders attention turned towards the next big risk event -- Fed Chair Janet Yellen's speech and also US Consumer Confidence survey due later in the day.
Bearish equity markets and month-end dollar demand predominantly weighed on rupee trade, a forex dealer said.
Strong capital inflows, however, limited the fall.
Asian currencies too were trading mixed ahead of the event.
An early rally in domestic stocks amid increased capital inflows helped the rupee to resume firmly higher at 64.48 from last Friday's close of 64.52 at the Interbank Foreign Exchange (forex) market.
The domestic currency gained further ground to hit an intra-day high of 64.40 amid smooth supply of dollars, but later fell back sharply in late afternoon deals to 64.54 before ending 1 paisa lower at 64.53.
On Friday, the domestic unit had ended 7 paise higher at 64.52.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.4572 and for the euro at 72.1921.
Domestic equities remained under immense selling pressure as investors booked profits led by state-run banking stocks on worries over higher provisioning requirements amid caution ahead of June expiry of derivatives contracts.
The flagship Sensex slumped 179.96 points to close at 30,958.25, while broader Nifty shed 63.55 points at 9,511.40.
Foreign funds have infused a staggering USD 4 billion in the Indian capital market so far this month on greater clarity on rollout of the new indirect tax regime and forecast of good monsoon.
Global oil prices continued to gain ground in Asia.
On the global front, the US dollar traded higher against the other major currencies as investors were awaiting speeches by Federal Reserve officials for signs on whether the central bank will stick to its guns and raise rates this year.
The dollar index, which tracks the US currency against a basket of six major rivals, was down at 96.54.
In cross-currency trades, the rupee remained weak against the pound sterling to end at 82.34 from 82.10 per pound and drifted sharply against the euro to finish at 72.73 from 72.02 earlier.
The home currency, however, recovered against the Japanese yen to 57.68 per 100 yens from 58.00 previously.
Meanwhile, country's forex reserves increased by USD 799 million, mainly on account of rise in foreign currency assets (FCAs), to touch a record high of USD 381.955 billion in the week to June 16, the RBI said.
In forward market today, premium for dollar showed a steady to easy trend in the absence of market moving factors.
The benchmark six-month premium payable in November was quoted at 127-128 paise, while the far forward May 2018 contract eased to 270-272 paise from 271.5-272.5 paise last weekend.
On the International commodity front, crude prices rallied for the fourth consecutive session on Tuesday boosted by a weaker dollar and investors covering short positions, though growing worries over persistent oversupply capped gains.
Brent crude futures, the international benchmark for oil prices, were up 25 cents to USD 46.08 per barrel in early Asian trade.
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