The Indian rupee pared initial gains and ended almost flat at 69.36 against the US dollar on Tuesday as simmering geopolitical tensions in the Middle East dampened forex market sentiment.

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At the interbank foreign exchange (forex) market, the domestic currency opened at 69.32 a dollar and touched a low of 69.40 and high of 69.22 during the day.

The local unit finally closed at 69.36 against the American currency, down 1 paisa over its previous close.

On Monday, the rupee had settled at 69.35 against the US dollar.

Forex traders said participants are cautious amid rising tensions between the US and Iran.

"Rupee has been consolidating in the range of 69 and 70 for last five weeks. Today rupee is trading flat, amid easing crude oil prices, foreign fund inflows and weakening of the US dollar in the overseas market," said V K Sharma, Head PCG & Capital Markets Strategy, HDFC Securities.

Brent crude futures, the global oil benchmark, fell 0.48 per cent to trade at USD 64.55 per barrel.

Foreign investors bought shares worth Rs 1,157.87 crore on a net basis on Tuesday, provisional data showed.

"Sustained weakness in the Dollar Index could be the prime reason for strength in the domestic currency despite weak economic data released in the recent past," Sharma said.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose marginally by 0.05 per cent to 96.02.

"All eyes are now on the upcoming meet between US President Trump and Chinese President Xi Jinping set to happen later in the week at G20 summit," Sharma added.

The BSE Sensex Tuesday pared losses and soared over 350 points, before settling 311.98 points, or 0.80 per cent, higher at 39,434.94. Similarly, the broader NSE Nifty rose 96.80 points, or 0.83 per cent, to 11,796.45.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 69.4788 and for rupee/euro at 79.1137. The reference rate for rupee/British pound was fixed at 88.6827 and for rupee/100 Japanese yen at 64.68.