The rupee pared some of its early gains to close with a marginal rise of 6 paise at 70.84 against the dollar on Tuesday as foreign fund inflows and lower crude oil prices rendered some support. However, stronger dollar against key global currencies kept the rupee movement under check through the session. The domestic unit opened on a bullish note after an extended weekend and rose to a high of 70.68 to the dollar during the day. But, it moved southward during the fag-end of the session and settled at 70.84, a gain of 6 paise.
Foreign institutional investors remained net buyers in the capital markets, putting in Rs 876.64 crore on Tuesday, exchange data showed.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.08 per cent to 97.84.
Brent crude, the global oil benchmark, fell 1.06 per cent to $60.92 per barrel in futures trade.
"Rupee gave away early morning gains amid dollar buying from state-run banks... However, the recovery in dollar index and dollar buying by banks on behalf of importers dragged rupee lower in afternoon session," said V K Sharma, Head - PCG & Capital Market Strategy, HDFC Securities.
Forex traders said that a caution also set in as market participants remained cautious ahead of the important FOMC policy statement that will be released later this week.
On the stock market front, the BSE Sensex settled 581.64 points, or 1.48 per cent, higher at 39,831.84. The broader NSE Nifty rallied 159.70 points or 1.37 per cent to close at 11,786.85.