The rupee slipped 2 paise to close at 81.65 (provisional) against the US dollar on Wednesday amid a strong American currency overseas and subdued market sentiments.
However, a fall in crude prices in the international market supported the local currency, forex traders said.
At the interbank foreign exchange market, the rupee opened strong at 81.59 to a dollar against the previous close of 81.63. The local unit moved in a range of 81.50 to 81.75 during the day.
It finally settled at 81.65 (provisional) against the US dollar, a fall of 2 paise over its previous close.
On Tuesday, the rupee had declined 21 paise to close at 81.63 against the US dollar.
Meanwhile, the US dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.15 per cent to 102.08.
On Wednesday, Brent crude was trading 0.34 per cent lower at USD 85.84 per barrel.
On the domestic equity market front, the 30-share BSE Sensex crashed 773.69 points or 1.27 per cent to close at 60,205.06. The broader NSE Nifty fell 226.35 points or 1.25 per cent to end below the 18,000-level at 17,895.91.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Tuesday as they sold shares worth Rs 760.51 crore, according to exchange data.