The rupee pared initial gains by dropping to 54.68 against the dollar in the afternoon trade on mild dollar buying by importers and banks.
At 2.20 p.m., the rupee was trading marginally lower at 54.52 per dollar.
The domestic unit opened higher at 54.38 today due to positive domestic and Asian equity markets. It had jumped 27 paise to close at 54.59 on Monday.
The local currency strengthened to 54.34 per dollar in the early trade on the back of higher capital inflows driven by deferment of the controversial General Anti-Avoidance Rules (GAAR) implementation to April 2016 from April 2014 as scheduled earlier.
In addition, the wholesale inflation data released on Monday, being the lowest in three years, raised the hopes of a rate cut by the Reserve Bank of India.
Further, selling of the American currency by exporters and banks and a stronger euro boosted the rupee and market sentiment.
