Snapping its five-day winning run, the rupee on Friday slumped 25 paise to close at 74.15 against the US dollar, in line with other emerging market currencies as hawkish comments by Federal Reserve officials weighed on sentiment.
At the interbank foreign exchange market, the local currency witnessed an intra-day high of 74.05 and a low of 74.21 against the US dollar.
It finally settled at 74.15, down 25 paise over its previous close of 73.90.
US Fed policymakers signalled they will start to raise interest rates in March to combat sky-high inflation.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.01 per cent down at 94.78.
Meanwhile, Brent crude futures, the global oil benchmark, advanced 1.01 per cent to $85.32 per barrel.
On the domestic equity market front, the BSE Sensex ended 12.27 points or 0.02 per cent lower at 61,223.03, while the broader NSE Nifty fell 2.05 points or 0.01 per cent to 18,255.75.
Foreign institutional investors remained net sellers in the capital market on Thursday, as they offloaded shares worth Rs 1,390.85 crore, as per exchange data.
According to Jateen Trivedi, Senior Research Analyst at LKP Securities, the domestic currency traded weak near 74.15 on the back of long position unwinding in rupee.
Rupee can be seen in the range of 74.00 to 74.50, he added.
"The Indian Rupee depreciated on Friday as foreign banks continued to cover their dollar short positions," said Sriram Iyer, Senior Research Analyst at Reliance Securities.
On a weekly basis, the rupee appreciated 19 paise against the dollar.
The rupee appreciated for the fourth straight week against the US currency, tracking gains in most regional currencies amid a persistent drop in the dollar index.
"The Rupee was also helped by corporate dollar sales, trade-related selling, fund flows and rumours of intervention from the Reserve Bank of India," Iyer said.
For the week, the unit rose 0.2 per cent, adding to the 2.4 per cent rise in the last three weeks. However, gains were capped as crude oil prices headed for a fourth successive weekly rise.