Bucking the uptrend in stocks, the Indian rupee today weakened four paise to finish at 61.87 against the US dollar due to sustained demand for the American currency from banks and importers.

Some caution adopted by participants ahead of core sector data outcome also impacted sentiments, said forex brokers.

The rupee resumed lower at 61.90 per dollar as against last Friday's closing level of 61.83 per dollar at the Interbank Foreign Exchange (Forex) Market.

It dropped further to a low of 61.99 on strong dollar demand from importers.

However, the domestic currency witnessed a strong rebound to hit an intra-day high of 61.80 on fresh dollar selling by banks and export houses. It settled for the day at 61.87 per dollar, showing a loss of 4 paise or 0.06 per cent.

Continued optimism of fund inflows and rallying equity market helped the rupee to cut short some of its inital losses, a forex analyst said.

"The rupee was also influenced by speculation that the RBI could delay interest rate cuts after the federal budget set a higher-than-expected fiscal deficit target," said Admisi Forex India Pvt Ltd, Director, Suresh Nair.

The dollar index surged to multi-year high against a number of major currencies bolstered by the Chinese surprise interest rate cut last weekend.