The rupee depreciated by 7 paise against the dollar on the first day of New Year on Friday due to firm demand for the US currency which rose to three-month high against other major currencies.

At the Interbank Foreign Exchange (Forex) market, the domestic unit traded 7 paise down at 46.60 a dollar. The rupee had ended 21 paise higher at 46.53/54 a dollar in the previous trading.

Dealers said the dollar rose to a three-month high against Japanese yen after reports that US jobless claims fell to the lowest since 2008 putting pressure on the Indian rupee.

Demand for the dollar from oil refiners and importers also weighed on rupee sentiment, they said.

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