Rupee trimmed its initial gains against the American currency and closed marginally up by 2 paise to 66.42 on selling of dollars by banks and exporters amidst fall in equity market.

The rupee opened higher at 66.35 as against yesterday's closing level of 66.44 per dollar at the Interbank Foreign Exchange market and firmed up further to 66.2250 on heavy selling of dollars by banks and exporters on the back of lower greenback in the overseas market.

But, it trimmed its initial gains and dropped to 66.4650 on fag-end dollar demand from banks before ending at 66.42, still showing a gain of mere 2 paise or 0.03 per cent.

The rupee had dropped by 11 paise or 0.17 per cent on Monday.

The domestic unit hovered in a range of 66.2250 and 66.4650 per dollar during the day.

The dollar index was down 0.35 per cent against a basket of six global currencies in the late afternoon trade.

Meanwhile, the RBI fixed the reference rate for the dollar at 66.2698 and euro at 76.6145.

In cross-currency trades, the rupee declined further against the pound sterling to finish at 97.40 from 97.31 on Monday.

It also moved down further against the euro to 76.91 per euro from 76.28 per euro previously.

The domestic currency also dropped further against the yen to 62.78 per 100 yens from 62.20.