The rupee on Wednesday fell 13 paise in itsbiggest drop in a week to end at 61.21 against the Greenback following fresh dollar demand from importers, amid uptick in retail inflation and slowing industrial production growth.
However, better local equities and some capital inflows helped restrict the fall to some extent, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced sharply lower at 61.29 a dollar from previous close of 61.08.
It was trapped in a narrow range of 61.21 and 61.30 before concluding at 61.21, logging a fall of 13 paise or 0.21 %. on Tuesday, it had gained nine paise or 0.15 %.
On Wednesday's 13 paise drop is its sharpest fall since August 6 when it had depreciated 65 paise against the US dollar.
On Tuesday, government data showed the country's industrial production slowed to 3.4 % in June as against 5 % in May, while retail inflation rose to 7.96 % in July from 7.46 % in June.
The benchmark S&P BSE Sensex on Wednesday closed up by 38.18 points, or 0.15 %, in see-saw trade.
FIIs had infused Rs 370.83 crore in stocks on Tuesday.
The dollar index was up by 0.12 % against its major global rivals. In New York Market, the US dollar rose against its major rivals on Tuesday after German economic expectations index reading hit its lowest since December 2012.
Pramit Brahmbhatt, Veracity Group CEO said: "Rupee depreciated. It had started the week on a positive note and but on Wednesday lost its way. The trading range for the spot rupee is expected to be within 60.80 to 61.80."
In the forward market premium dropped on receipts by exporters.
The benchmark six-month premium payable in January dipped to 230-232 paise from last close of 239.5-240.5 paise.
Far-forward contracts maturing in July, 2015 also tumbled to 476-478 paise from 486-487 paise.
The Reserve Bank of India fixed the reference rate for dollar at 61.2458 and for the euro at 81.8990.
The rupee continued to rule firm against the pound to end at 102.24 from 102.47 previously while fell back against the Japanese yen to 59.76 per 100 Japanese yen from 59.72.
It also reacted downwards against the euro to 81.78 from 81.50 on Tuesday.