The rupee declined versus the US dollar on Tuesday, retreating slightly after gaining in the past three sessions as the euro came under renewed pressure in the overseas market.

Dollar purchases by domestic oil companies and corporates was also seen dampening the sentiment for the rupee. Dollar demand from oil refiners typically rises towards the end of each month. 

Traders also spotted bunched up outgoing corporate dollar remittances because Monday was a public holiday in the United States.

The rupee ended at 55.67 per dollar after touching a day's low of 55.89. It had opened at the day's high of 55.39 as against the previous close of 55.19.

It had touched 55.0100 yesterday, the strongest level since May 22. The rupee touched an all-time low of 56.3875 last week and has lost 7.5% this quarter.

The partially-convertible Indian currency dropped after Petroleum Minister S. Jaipal Reddy said yesterday that the Government was not considering any hike in the prices of state-subsidized fuels, raising concern about the Government’s plans to curtail its ballooning fiscal deficit. 

FIIs sold Indian equities worth US$553mn in the past two months while investments in debt is down by US$1.4bn.

The euro was poised for the biggest monthly decline since September. The 17-nation currency was 0.3% from the lowest since July 2010 after yield premiums on Spain’s securities over Germany’s rose to the most in 17 years. 

The Dollar Index traded near the highest in 20 months as lingering worries about Europe’s turmoil boosted demand for safe haven assets.