Mumbai: The rupee fell from its three-week high on Tuesday, as a dollar rally overseas offset gains in the domestic equity market.

The partially convertible rupee closed at Rs48.72/73 per dollar, off a low of Rs48.80 but still 0.3% weaker than its previous close of Rs48.57/58.

“There was good two-way interest in the market today, which held the rupee in a range,” a dealer at a state-run bank said. “It is likely to stay like this for a while.”

Stock markets rose for a third session in a row on Tuesday, climbing 0.7% to their highest close in nearly five weeks, but trading was volatile ahead of an expected stimulus package in next week’s interim budget.

Foreign investors have bought nearly $100 million worth of shares in the last three trading sessions, but are still net sellers of about $1 billion in 2009. They had dumped shares worth more than $13 billion in 2008.

Dealers said they would continue to eye the share market for cues on direction of foreign fund flows, which have been a key driver for the local unit in recent years.

Despite stock gains, the rupee slipped as the dollar’s gains overseas weighed on sentiment. The dollar index, a gauge of the US currency’s performance against other major units overseas was up 0.1%. It had risen as much as 0.8% earlier.

The dollar gained broadly on Tuesday as investors sought the perceived safety of the US currency before the US government announced the outline of a widely anticipated plan to shore up its ailing banking sector.