The rupee wiped off its initial losses and was trading a tad strong at 63.73 in the evening session owing to capital inflows into the domestic equity market.
The dollar hit a 3-1/2 month high against a basket of currencies on Wednesday after a voting member of the US Federal Reserve's policy-setting committee expressed support for an interest rate hike in September. The dollar index was up 0.1 per cent at 98.096, having hit a high of 98.218 in Asian trade, its highest since late April.
According to dealers, besides dollar's strength against other currencies overseas, increased demand for the greenback dampened the rupee sentiment.
The rupee depreciated 19 paise to 63.93 against the dollar in early trade at the Interbank Foreign Exchange market. Later, it strengthened to 63.72 before being quoted at 4.50 pm local time. The domestic unit hovered in the range of 63.93 and 63.72 in the evening trade.
Yesterday, the rupee had surged 30 paise to close at a two-week high of 63.74 on selling of the greenback by banks and exporters owing to a lower dollar overseas.
Meanwhile, the benchmark BSE Sensex ended higher by 151.15 points or 0.54 per cent at 28,223.08.