The rupee depreciated 6 paise to close at 81.70 (provisional) against the US dollar on Friday amid a lacklustre trend in domestic equities and firming crude oil prices.
However, a weak dollar in the overseas market and fresh foreign capital inflows restricted the loss, forex traders said.
At the interbank foreign exchange market, the local unit opened up at 81.59 and later erased all its early gains. During the session, it witnessed a high of 81.52 and a low of 81.78.
The domestic unit finally settled at 81.70 against the American currency, registering a fall of 6 paise over its previous close of 81.64.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.28 per cent to 106.39.
Global oil benchmark Brent crude futures rose 0.36 per cent to USD 90.10 per barrel.
On the domestic equity market front, the 30-share BSE Sensex fell 87.12 points or 0.14 per cent to end at 61,663.48, while the broader NSE Nifty declined 36.25 points or 0.20 per cent to 18,307.65.
Foreign Institutional Investors (FIIs) were net buyers in capital markets as they bought shares worth Rs 618.37 crore on Thursday, according to exchange data.