In line with fall in local stocks, the rupee on Tuesday lost nine paise to end the day at 60.94 against the dollar, after straight five sessions of gains.
In early trade, the domestic currency rallied to a high of 60.59, a level not seen since August 12, 2013, when it touched intra-day high of 60.45.
Forex dealers said initial dollar selling by exporters pushed the rupee up.
At the Interbank Foreign Exchange (Forex) market, the rupee resumed better at 60.82 a dollar from the last close of 60.85.
However, it fell sharply on weakness in stocks and dollar demand from importers. It finally concluded the day at 60.94, a fall of nine paise from the last close.
In the past five sessions, the local currency had flared up by 119 paise or 1.92 per cent.
Strong USD overseas amid fresh dollar demand from importers and renewed capital outflows also weighed on the rupee, a forex dealer said.
Meanwhile, benchmark BSE Sensex dipped by 108.41 points, snapping five days of gains.
Foreign institutional investors (FIIs) sold shares worth $ 611.66 million on Monday, as per SEBI data.
“Consistent FII flows have certainly been helping the rupee to gain during the last couple of weeks.... Report released today showed an improvement in the overall trade deficit but exports shrank for the first time in eight months. So we can say that this data was mixed,” said Abhishek Goenka, Founder and CEO, India Forex Advisors.