The rupee pared most of its initial losses and settled for the day 5 paise lower at 73.84 (provisional) against the US dollar on Tuesday, tracking a rebound in domestic equities.
At the interbank forex market, the domestic unit opened at 73.95 against the US dollar and witnessed an intra-day high of 73.82 and a low of 73.95.
The local unit finally closed at 73.84 against the American currency, registering a fall of 5 paise over its previous close.
On Monday, the rupee plunged 23 paise to end at a two-week low of 73.79 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.29 per cent higher at 90.30.
"Market sentiments were hurt amid concerns over new virus strain in UK. Traders fear that emergence of new strain of coronavirus in Britain has led to fresh travel restrictions, which may impact global economic recovery. Rupee may trade in the range of 73.40 to 74.25 in next couple of sessions," said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
Rupee, which opened sharply lower, gained some strength during the day and settled 5 paise lower against the US dollar, as US lawmakers passed USD 900 billion coronavirus relief deal and a USD 1.4 trillion full-year spending bill that will fund the government through next September, Mukadam said.
Moreover, after the UK and the US, now European Union Medicine agency said vaccine developed by Pfizer-BionTech is safe and effective against Covid-19, making way for EU authorities to authorize the use of the vaccine.
On the domestic equity market front, the BSE Sensex ended 452.73 points or 0.99 per cent higher at 46,006.69, while the broader NSE Nifty advanced 137.90 points or 1.03 per cent to 13,466.30.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 323.55 crore on a net basis on Monday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 1.37 per cent to USD 50.21 per barrel.
