The rupee pared its initial gains to close almost flat at 70.92 against the US dollar on Thursday due to dollar buying by importers and banks.

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Rising crude prices and month-end dollar demand from oil importers weighed on the rupee sentiment, dealers said.

At the interbank foreign exchange market, the rupee opened strong at 70.77 against the US dollar, driven by the US Federal Reserve's move to lower its interest rates for a third straight time.

The domestic unit, later, gave up gains to settle at 70.92, showing a marginal fall of 2 paise over its previous close.

"Rupee has been trading in the narrow range of 70.68-71.10 for last seven sessions. After positive opening of 6 paise, rupee lost the ground after Dow index fell in the electronic trade in the second half of the session," said V K Sharma, Head PCG & Capital Markets Strategy, HDFC Securities.

The BSE Sensex settled 77.18 points, or 0.19 per cent, higher at 40,129.05. The broader NSE Nifty too advanced 33.35 points, or 0.28 per cent, to close at 11,877.45.

Foreign institutional investors bought equities worth Rs 1,870.87 crore on Thursday, exchange data showed.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.43 per cent to 97.22 after reports suggested that China was doubting reaching a trade deal with the US.

Brent crude futures, the global oil benchmark, was trading 0.05 per cent higher at USD 60.64 per barrel.

The 10-year government bond yield was at 6.45 per cent in morning trade.

The Financial Benchmarks India fixed the reference rate for the US dollar at 70.9915, for the British pound at 91.3594and for the euro at 78.8929. It set the rate Japanese yen at 65.23 for 100 yens.