The rupee fell 28 paise to close as 81.70 (provisional) against the US dollar on Tuesday as unabated foreign fund outflow hit market sentiments.
However, a weak dollar and fall in crude prices capped the losses in the local currency, forex traders said.
At the interbank foreign exchange market, the rupee opened lower at 81.61 to a dollar against the previous close of 81.42. The local unit moved in a range of 81.43 to 81.76 during the day.
On Monday, the rupee had declined by 25 paise to close at 81.42 against the US dollar.
Meanwhile, the US dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.01 per cent to 102.15 amid concerns over US economic growth.
The Brent crude was trading 0.41 per cent lower at USD 87.83 per barrel.
On the domestic equity market front, the 30-share BSE Sensex ended almost flat at 60,978.75, up 37.08 points or 0.06 per cent. The broader NSE Nifty inched up 0.25 points to 18,118.30.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Monday as they sold shares worth Rs 219.87 crore, according to exchange data.
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