The Indian rupee pared initial gains and settled 8 paise lower at 82.86 against the U.S. dollar on Tuesday,  January 3, weighed by a strong Dollar overseas and sustained foreign fund outflows.

The rupee began trading the day at the interbank foreign currency market with gains against the dollar at 82.69, but it quickly gave up those gains and dropped to an intraday low of 82.92. The domestic currency finally ended at 82.86, down 8 paise over its previous close of 82.78.

The dollar index, which gauges the strength of the greenback against a basket of six currencies, was trading 1 percent higher at 104.55.

International oil benchmark Brent crude futures rose 0.02 percent to USD 85.93 per barrel. Spot USD-IndianRupee has been consolidating in the narrow range of 82.40 to 82.95.

In stocks, NSE Nifty rose 35.10 points or 0.19 percent to 18,232.55, while the BSE Sensex closed 126.41 points or 0.21 percent higher at 61,294.20.

According to exchange data, Foreign Institutional Investors (FIIs) remained net sellers in the capital markets on Monday as they offloaded shares worth Rs.212.57 crore.

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