The rupee pared its early gains against the US dollar to end lower by 13 paise at 68.08 on renewed dollar demand from importers amid worries over capital outflows.
A sudden reversal of dollar weakness alongside continued FII outflows largely impacted the trading sentiment even as emerging market currencies remained subdued.
The US dollar regained some lost ground ahead of release of data on inflation and industrial production as well as a speech by Federal Reserve Chair Janet Yellen, due later in the day, for further indications on the strength of the economy.
The rupee resumed a tad higher at 67.93 from previous close of 67.95 at the Interbank Foreign Exchange (forex) market. It advanced further to 67.86 on dollar selling by exporters amid firm equities in morning session.
But, it succumbed to some downward pressure in late afternoon trade following fresh bouts of dollar demand from foreign banks and hit a low of 68.09 before ending at 68.08, revealing a loss of 13 paise, or 0.19 per cent.
The rupee had gained a good 21 paise in the last two days.
The US dollar index bounced back from a one-month low and was trading higher at 100.60 in late afternoon session.
The RBI fixed the reference rate for the dollar at 67.9364 and for the euro at 72.5968.
The rupee also fell sharply by 99 paise against the British pound to settle at 83.71 against last close of 82.72 per pound.
The pound has strengthened against all major counterparts globally after British Prime Minister Theresa May announced that the country will leave EU's single market and lawmakers will vote on the final deal for the exit from trading bloc.
The rupee softened against the euro to settle at 72.74 as compared to 72.73 on Wednesday.
However, it staged a smart rebound against the Japanese Yen to finish at 60.00 per 100 yens from 60.23 earlier.
Meanwhile, domestic equities witnessed a modest pull
back following good buying support in metal and FMCG shares amid supportive Asian sentiment.
The benchmark Sensex rebounded 21.98 points to end at 27,257.64, while broder Nifty gained 19 points at 8,417.
Foreign portfolio investors (FPIs) remained buyers for the second day putting in Rs 319 crore on net basis in equities. Yesterday, they bought shares worth a net Rs 142.21 crore after a long and irresistible selling spree.
In the forward market, premium for dollar showed a steady trend in the absence of any market moving factors.
The benchmark six-month premium for June was quoted at 141-143 paise and the far-forward December 2017 contract at 282-284 paise.
Crude oil prices drifted on growing expectations that U.S. Producers would boost output and eventually broke below the strong support level of USD 52.14 in a highly volatile trade.
