The rupee lost 16 paise to close at 71.38 against the US dollar on Thursday as steady rise in crude oil prices and strength of the dollar against key global currencies weighed on sentiment.
At the interbank foreign exchange market, the domestic currency opened weak at 71.27 a dollar. It touched the day's high of 71.26, before finally settling at 71.38, a drop of 16 paise over its previous close.
The Indian currency is trading in a narrow range amid lack of directional cues from the global market, experts said. Rise in crude oil prices weighed on the domestic unit, but robust domestic equities supported the rupee and restricted the fall, they added.
Brent futures, the global oil benchmark, rose 0.50 per cent to USD 66.33 per barrel.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.24 per cent to 96.67.
On the domestic equity market front, the 30-share BSE Sensex ended 320.62 points, or 0.78 per cent, higher at 41,626.64. Similarly, the NSE Nifty closed 99.70 points, or 0.82 per cent, up at 12,282.20 -- its new closing record.
"Rupee extended losses to 71.36 on back of crude prices holding at higher levels which is making importers buy the dollar to hedge the net outflows for crude buying," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.
Foreign institutional investors (FIIs) bought equities worth Rs 688.76 crore on a net basis on Thursday, according to provisional exchange data.
"This month (January), economic calendar on domestic front remains little muted and focus will be primarily on the inflation number that has seen an uptick in last few months following rise in food prices. But on other hand, clarity on trade talk between the US and China could increase the volatility for the currency. We expect USD/INR (Spot) to quote in range of 70.50-72.50," according to Motilal Oswal Financial Services' Commodity and Currency Canvas report.
The 10-year government bond yield was at 6.50 per cent.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.3717 and for rupee/euro at 80.0305. The reference rate for rupee/British pound was fixed at 94.6413 and for rupee/100 Japanese yen at 65.69.