It is not just Western sanctions on Russia that accelerated the trend to circumvent the dollar, but the strength of the currency in the past year has also posed a challenge.
The rupee on Monday ended 31 paise lower at 82.78 at the interbank foreign exchange market.
The Indian currency opened 10 paise higher at 82.57 on the support of easing crude oil prices and touched a high of 83.01 during intraday trade.
China is seeing fresh COVID curbs resulting in a fall in crude oil prices.
The Indian rupee gained during intraday trade and touched a high of 82.32 eventually closing at 82.78 ahead of the key Federal Reserve Bank meeting this week.
The rupee pared its initial gains and settled 31 paise lower at 82.78 (provisional) against the US dollar on Monday, tracking the strength of the American currency in the overseas market.
There are expectations of another rate hike by the US Federal Reserve when it meets on Wednesday (November 2).
Analysts are hoping that US Federal Reserve chairman Jerome Powell may be less hawkish while reviewing key rates.
Traders are also awaiting the manufacturing PMI and trade deficit data, which is expected to be released on Tuesday as it may significantly impact the rupee movement.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.28 per cent to 111.05.
Sensex closed with a gain of 786.74 points at 60,746.59, and Nifty closed with a rise of 225.40 points to 18,012.20.
(with inputs from Agencies)