The rupee dropped overnight gains against the dollar on the money market on Tuesday in the process of trading, dealers said.
In the second Asian trade, the dollar edged higher against its peers on Tuesday after the United States imposed a new round of tariffs on Chinese imports, exacerbating global trade woes and fuelling demand for the safe-haven greenback.
US President Donald Trump said on Monday that he will impose 10 percent US tariffs on about $200 billion worth of Chinese imports.
Trump said that if China takes retaliatory action against US farmers or industries, "we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports."
The dollar index against a basket of six major currencies stood edged up 0.1 percent to 94.607.
It had declined about 0.5 percent the previous day, weighed down as the pound and the euro advanced amid optimism over prospects for a Brexit deal with the European Union.
The rupee was trading against the Indian rupee at Rs 72.510, the greenback was at 4.145 in terms of the Malaysian ringgit and the US currency was at 6.874 versus the Chinese yuan.
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Open Bid Rs.125.20
Open Offer Rs.125.50
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Bid Rate Rs.124.24
Offer Rate Rs.124.25
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According to currency dealers, the short supply phenomenon of the greenback prevailed throughout the trading session which helped its appreciation for buying and selling at Rs 125.20 and Rs 125.60 against the overnight closing trend of Rs 124.50 and Rs 125.50 respectively.
Similarly, the local currency also followed the same suit against the pound sterling. The pound's buying and selling rates rose from Monday's closing of Rs 162.10 and Rs 163.10 to Rs 163.30 and Rs 164.50 respectively, they added.
The dollar opened at Rs 125 (buying) and Rs 125.10 (selling) against same last rate. It closed at Rs 125 (buying) and Rs 125.10 (selling).