The rupee fell 40 paise to close at 79.64 provisional against the on Monday amid waning risk appetite among investors.
The losses were restricted by lower global crude prices and a rally in domestic equity, according to dealers.
The domestic currency opened weaker on the interbank foreign exchange market at 79.50 per dollar. It oscillated between a high of 79.45 and a low of 79.65 during the session.
It finally settled at 79.64, down 40 paise over its previous close of 79.24.
The dollar index, which measures the strength of the dollar against a basket of six currencies, fell by 0.25 per cent to 106.57.
The global oil benchmark, Brent crude futures, declined by 0.54 per cent to USD 94.38 per barrel.
On the domestic equity market front, the BSE Sensex ended 465.14 points or 0.80 per cent higher at 58,853. The broader NSE Nifty advanced by 127.60 points or 0.73 per cent to 17,525. According to exchange data, 81 crore were reported to be in the process of being accounted for.
After turning net buyers last month, foreign investors continued their positive stance on Indian equities and invested over 14,000 crore in the first week of August amid the softening of the dollar index.
This was higher than the net investment of nearly 5,000 crores by Foreign Portfolio Investors FPIs in the entire month, according to depositories.