The rupee continued to fall for the second consecutive day and declined by 22 paise to settle at 66.46 against the US dollar on persistent demand for the American currency from banks and importers amidst foreign capital outflows.
Besides, a sharp fall in equity markets affected the rupee value against the dollar.
The rupee opened higher at 66.16 against Thursday's closing level of 66.24 at the Interbank Foreign Exchange (Forex) market and firmed up further to 66.10 on initial dollar selling by banks.
However, it declined sharply to 66.52 on fresh demand for dollars from banks and importers before concluding at 66.46, showing a loss of 22 paise, or 0.33%.
The rupee has dropped 27 paise, or 0.41%, in two days. It moved in a range of 66.10 and 66.52 during the day.
Globally, the US dollar was higher against its major rivals in early Asian trade after the European Central Bank gave a sobering assessment of the Eurozone economy and suggested that it may have to beef up its already massive stimulus programme.
However, the US dollar index, which tracks the greenback against a basket of six major rivals, was up by 0.15%.
Oil prices edged lower in cautious Asian trade on Friday as investors await the release of a US jobs report for August that could determine the Federal Reserve's time-table for hiking interest rates.
Meanwhile, the benchmark BSE Sensex tumbled by 562.88 points, or 2.18%, to settle at 25,201.90 on Friday.
In Friday's forward market, the premium for dollar eased further on persistent receivings from exporters.
The benchmark six-month premium payable in February eased to 207-209 paise from 207.5-209 paise previously and far forward August 2016 contracts also moved down further to 422-424 paise from 426-427.5 paise.
The RBI fixed the reference rate for the dollar at 66.4003 and for the euro at 73.8903.
The rupee ended steady against the pound sterling to close at 101.17 and firmed up further against the euro to 74.03 from 74.37 previously.
However, it dropped against the Japanese currency to finish at 55.77 per 100 yen from 55.11 on Thursday.