The rupee fell 12 paise to settle at 83.15 (provisional) against the US dollar on Friday, dragged down by rising crude oil prices and a strong greenback against major rivals overseas.
However, a positive trend in domestic markets restricted the downside for the local unit, forex traders said.
At the interbank foreign exchange market, the local unit opened at 83.02 against the US dollar and moved in a range of 82.98 and 83.20.
The rupee finally settled at 83.15 (provisional) against the US dollar, down 12 paise from its previous close.
On Thursday, the rupee closed 2 paise lower at 83.03 against the US dollar.
"The Indian rupee traded in the narrow range amid dollar inflows from the FTSE rebalancing while the nationalised bank bought the dollar on behalf of oil importers," said Dilip Parmar, Research Analyst, HDFC Securities.
Spot USD/INR is expected to consolidate between 82.70 to 83.15 before next week's three major central banks' (Federal Open Market Committee (FOMC), Bank of England (BoE) and Bank of Japan (BoJ) policy decisions.
"The dovish ECB hike and another round of strong US activity data sent the dollar index (DXY) on another rally above 105," Parmar said.
Parmar further added that the dollar may correct a bit lower in the near term, but the risks remain skewed towards further strengthening, or at least until the US activity picture starts to show some cracks.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.19 per cent to 105.20.
Brent crude futures, the global oil benchmark, advanced 0.28 per cent to USD 93.96 per barrel.
On the domestic equity market front, the 30-share BSE Sensex closed 319.63 points or 0.47 per cent higher at 67,838.63. The broader NSE Nifty advanced 89.25 points or 0.44 per cent to 20,192.35.
According to exchange data, Foreign Institutional Investors (FIIs) were net buyers in the capital market on Thursday as they purchased shares worth Rs 294.69 crore.