The rupee fell 40 paise to close at 79.64 (provisional) against the US dollar on Monday amid waning risk appetite among investors.
Lower global crude prices and a rally in domestic equities restricted the losses to some extent, forex dealers said.
At the interbank foreign exchange market, the domestic currency opened weak at 79.50 per dollar. It oscillated between a high of 79.45 and a low of 79.65 during the session.
It finally settled at 79.64, down 40 paise over its previous close of 79.24.
The dollar index, which measures the greenback's strength against a basket of six currencies, slipped 0.25 per cent to 106.57.
Brent crude futures, the global oil benchmark, declined 0.54 per cent to $94.38 per barrel.
Foreign institutional investors remained net buyers in the capital market on Friday as they purchased shares worth ₹1,605.81 crore, as per exchange data.
After turning net buyers last month, foreign investors continued their positive stance on Indian equities and invested over ₹14,000 crore in the first week of August amid softening of the dollar index.
This was way higher than the net investment of nearly ₹5,000 crore by Foreign Portfolio Investors (FPIs) in the entire July, data with depositories showed.