At the interbank forex market, the domestic unit opened on a strong note at 73.38 against the US dollar, then gained further to quote at 73.35.
The local unit, however, pared the initial gains and was trading at 73.46, up by just 1 paisa over its previous close.
Forex traders said heavy selling in domestic equity markets and a rebound in American currency weighed on the rupee.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.04 per cent to 92.77.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 464.61 points lower at 38,526.33, and the broader NSE Nifty fell 130.30 points to 11,397.15.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 7.72 crore on Thursday, according to exchange data.
Brent crude futures, the global oil benchmark, fell 0.93 per cent to USD 43.66 per barrel.
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