At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced lower at 60.61 a dollar from previous close of 60.53 and was trapped in a narrow breadth of 60.53 and 60.6925 before ending at 60.68, a fall of 15 paise or 0.25 percent. This is rupee's lowest closing since 60.76 on August 16.

The dollar index was up by 0.22 percent against a basket of six major global units. The Yen slipped toward a five-year low against the dollar on hopes that Japan's Prime Minister Shinzo Abe will appoint assistant to head the ministry in charge of reforming the Government Pension Investment Fund.

The pound and euro also weakened against the American currency on improving US economy that will boost the case for the Federal Reserve to raise interest rates.

"The rupee lost quarter percent during the day taking cues from strong dollar overseas. Local equities posted new all time high which supported Rupee from depreciating further. On Monday US markets were closed on Labor Day which created the dollar demand in market for the day.

"Increased dollar demand from importers forced rupee to close low. The trading range for the Spot rupee is expected to be within 60.40 to 61.00," Pramit Brahmbhatt, Veracity Group CEO, said.

Meanwhile, continuing its record-breaking spree, the benchmark S&P BSE Sensex on Tuesday flared up by 151.84 points to end past the 27,000-mark for the first time in the history at 27,019.39. FIIs picked up shares worth Rs 554.14 crore on Monday, as per provisional data.

"Rupee was seen weakening as US dollar was seen gaining against the basket of currencies. US dollar index breached the level of 83.00 for the first time in last one year," said Abhishek Goenka, founder and CEO of India Forex Advisors.

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