Weakness in other currencies against the dollar overseas, after US Fed indicating interest rates could rise earlier than expected as the jobs market picking up, also put pressure on the local unit, forex dealers said.
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The Reserve Bank of India sold dollars via state-owned banks around 62.3575 per dollar to contain the rupee's fall, traders said.
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In New York market, the dollar lost ground against most major rivals on last Friday amid mixed US data on industrial production and consumer sentiment.
Foreign investors have bought around $2.4 billion in both debt and equity so far in October, pushing the total inflows to nearly $36 billion so far in the year.
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Most Asian currencies weakened versus the dollar with the Thai baht and Philipine peso sliding on disappointing economic data.
In New York market, the dollar fell further against the euro yesterday after minutes from the Federal Reserve's March meeting detailed risks that could keep interest rates depressed even after the first rate hike.
Domestic shares and other global markets rose on upbeat trade data from China earlier in the day and after a US House deal extending the federal borrowing authority.
In New York market, the dollar fell against the Japanese yen yesterday, taking cues from declines in US stocks.
The rupee had gained five paise to close at 63.25 against the dollar in on Monday's trade on fresh selling of the US currency by exporters amid bullish stocks.
The partially convertible rupee closed at 61.31/32 per dollar, unchanged from its Tuesday close.
Forex dealers said besides the dollar's gains against other currencies overseas, increased demand from importers for the American unit put pressure on the rupee but a higher opening in the domestic equity market capped losses.
The rupee which has been relatively stable over the last couple of months after having seen as much as 20 percent fall to a record low in late August has been boosted mainly by robust foreign fund inflows into the stock market.
The rupee has fallen 0.8 per cent so far this year, hitting a one-month low on Friday, hurt by a stronger dollar globally as well as caution ahead of key economic data this month.
The dollar's weakness against other currencies overseas and a higher opening in the domestic equity market supported the rupee, forex dealers said.
Standard and Poor's raised the outlook for India's "BBB-minus" rating back to "stable" from 'negative,' saying Prime Minister Narendra Modi government's 'strong' mandate would allow it to implement fiscal and economic reforms.
Forex dealers said besides the dollar's gains against the euro overseas, increased demand from importers for the US currency and a lower opening in the domestic equity market also put pressure on the rupee.
Weakness of the dollar in the overseas market also boosted the rupee, a forex dealer said.
The rupee resumed higher at 61.75 as against the last closing level of 62.05 per dollar at the Interbank Foreign Exchange (Forex) Market and firmed up further to a one-month high of 61.53 before quoting at 61.59 per dollar at 1045 hours.
In the global markets, the US dollar traded lower in early trade after former US Treasury Secretary Larry Summers withdrew himself from the race to be the next Federal Reserve chairman.
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The rupee resumed lower at 61.15 per dollar as against the last closing level of 60.77 per dollar yesterday at the Interbank Foreign Exchange (Forex) Market and dropped further to 61.44 per dollar before quoting at 61.40 per dollar at 1045 hours.
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