The rupee on Thursday slipped by 13 paise to close at 63.97 against the US dollar on fresh demand for the greenback from banks and importers.
Besides, higher dollar overseas amid continued capital outflows kept the rupee under check, forex dealers said.
At the Interbank Foreign Exchange (Forex), the domestic currency resumed higher at 63.81 from last close of 63.84 and improved further to a high of 63.74 on initial strong rally in local stocks.
However, it met with strong resistance and fell back to a low of 64.01 before ending at 63.97, showing a loss of 13 paise, or 0.20%, from its last close.
The rupee had gained by 24 paise, or 0.37%, in the last two days.
It hovered in a range of 63.74 and 64.01 during the day.
Foreign Portfolio Investors (FPIs) continued their selling spree and sold shares worth Rs 482.11 crore on Wednesday, as per provisional data.
The dollar index, a gauge of six major global rivals, was up by 0.54% in Asian trade on Thursday.
Meanwhile, current account deficit (CAD) narrowed sharply to $1.3 billion, or 0.2% of GDP, on a sequential basis, mainly on account of a lower trade gap.
In the Asian market, the yen fell against the dollar and the euro on Thursday, with dip buying kicking in to bring the greenback back from the lows caused by comments by the head of the Bank of Japan the previous day.
The benchmark S&P BSE Sensex on Thursday ended lower by 469.52 points, or 1.75%, to settle at 26,370.98.