Mumbai: The rupee made up further ground against the American currency, appreciating 8 paise to end at 66.71 on continuous dollar unwinding from exporters and banks.
Subdued overseas sentiment ahead of the Federal Reserve's two-day monetary policy meet outcome largely influenced the forex market, with investors probably unwilling to take long commitments.
Better-than-expected manufacturing sector growth, which climbed to a 22-month high in October, driven by a sharp increase in new orders, also aided the rupee, regardless of the fall in equities.
Maintaining its strong edge against the US currency, the domestic unit opened on a firm footing at 66.72 against last Friday's closing value of 66.79 and immediately hit a fresh high of 66.67 in mid-morning deals.
Later, it moved in a narrow range with erratic and unsteady movements in the absence of any market-moving factor before ending at 66.71, a gain of 8 paise, or 0.12 per cent.
It moved in a range of 66.67 and 66.76 per dollar during the day. The home currency had gained 8 paise on Friday. Forex market remained closed yesterday on account of Diwali Balipratipada.
In a widely-expected move, the Bank of Japan (BOJ) maintained the 0.1 per cent interest it charges for a portion of excess reserves that financial institutions park with the central bank while it maintained its forecast that the economy is likely to expand moderately.
The dollar Index, which measures its broader strength against a basket of currencies, was down 0.21 per cent at 98.11 in the afternoon trade.
RBI on Tuesday fixed the reference rate for the dollar at 66.71 and euro at 73.17.
In cross-currency trades, the rupee retreated sharply against the pound sterling to finish at 81.71 from 80.99 and fell back against the euro to settle at 73.37 compared with 72.94 previously.
It also declined against the Japanese yen to end at 63.55 from 63.43 per 100 yens.
In the meantime, the country's foreign exchange reserves rose by $1 billion to $367.14 billion for the week ended October 21.
Foreign portfolio investors (FPIs) offloaded shares worth $526.49 million last week.
Domestic bourses succumbed to late profit-taking despite a promising start following selling in frontline technology stocks amid ongoing corporate earning woes.
The flagship Sensex shed 53.60 points to end at 27,876.61 while the broader Nifty settled a tad higher at 8,626.25.
In the forward market, premium for dollar showed an easy trend due to lack of market-moving factors.
The benchmark 6-month premium for April ended at 173.5-175.5 paise from 174.5-175.5 paise and the forward-October 2017 contract settled at 346.5-348.5 paise from 347.5-348.3 paise earlier.
Crude prices traded a notch higher after rebounding from 1-month low overnight amid mounting uncertainty over the OPEC production output cut talks later this month.
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