In the volatile session, Indian rupee ended lower by 17 paise at 73.78 per dollar, amid buying seen in the domestic equity market.
It opened lower at 73.67 per dollar against Friday's close of 73.61 and traded in the range of 73.53-73.85.
At 14:28 IST, the Sensex was up 568.45 points or 1.52% at 37957.11, and the Nifty was up 172.40 points or 1.56% at 11222.70.
“On Friday rupee rose in the first half of the session following recovery in domestic equities but gains remained capped as the dollar strengthened against its major crosses. On the domestic front, focus will be on fiscal deficit number that will be released next week and widening deficit could keep the rupee weighed down," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
"From the US, market participants will be keeping an eye on the durable goods number. In the next couple of sessions we expect USDINR (Spot) to quote in the range of 73.40 and 74.20,” he added.
The dollar hovered near a two-month peak against at a basket of currencies on Monday as investors look to a barrage of upcoming economic data and political developments in the United States before making any fresh bets on the U.S. currency.
Oil prices dipped again on Monday as rising coronavirus cases upset hopes for a smooth recovery in fuel demand, with crude on track for its first monthly fall in many months after slipping last week.
"Rupee ends higher on likely FII inflows and tepid Dollar moves which helped the rupee scale high towards 73.60 odd zones. 73.90-74.20 shall keep acting as strong resistance zone for USDINR pair," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.
The dollar is currently being driven by risk aversion that made traders quit their dollar shorts as the outlook for the global economic recovery darkened with a second wave of Covid-19 cases in Europe, said ICICIdirect.
The dollar-rupee September contract on the NSE was at 73.72 in the last session. The open interest in the September series declined 18.82% while it increased 21.16% in the next series, it added.