Rupee falls on dollar short-covering, oil demand seen

The rupee fell to 53.85/86 from its previous close of 53.80/81 on the back of some dollar short-covering by state-run banks while dollar demand from oil firms also weighed.

The euro slipped against the dollar in anticipation of the European Central Bank cutting interest rates in an attempt to support a flagging economy.

Traders said weak manufacturing PMI also boosted dollar sentiment. India's factories lost momentum in April as output grew at its weakest pace in over four years, but a jump in export orders augured well for the coming months, a survey showed on Thursday.

Dealers said the market is sitting short on the dollar ahead of the anticipated rate cut on Friday. Some short covering was triggered when the rupee rose to a two-month high of 53.6625 this morning, the dealers added.

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