The rupee traded in a narrow range and settled 5 paise lower at ₹82.38 against the U.S. dollar on Thursday, tracking a muted trend in domestic equities amid weak domestic macroeconomic data.
Besides, risk aversion sentiment among investors weighed on the local unit.
At the interbank foreign exchange, the rupee witnessed range-bound trading. It opened at ₹82.30 against the U.S. dollar, then fell further to close at ₹82.38, registering a fall of 5 paise over the last close. It was moving in a tight range of ₹82.25 to ₹82.42.
On Wednesday, the rupee fell by 12 paise to close at ₹82.33 against the greenback.
"Asian currencies fell amid caution as traders awaited Thursday's US inflation data for clues on how much the US Federal Reserve will raise rates," said Dilip Parmar, Research Analyst, HDFC Securities.
Mr. Parmar further added that along with weak regional currencies, dismal domestic economic data weighed on the Indian rupee. On the forward market, the one-year forward USD/INR premium declined as the central bank was at the receiving end.
"Spot USD/INR has been trading in the narrow range this week amid the central bank intervention on both sides. In the near-term, spot USD/INR is having resistance at 82.85 and support at 82.10," Mr. Parmar noted.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.26% to 113.02.
Brent crude futures, the global oil benchmark, rose 0.32% to $92.85 per barrel.
In the domestic equity market, the 30-share BSE Sensex closed 390.58 points or 0.68% down at 57,235.33, and the broader NSE Nifty fell 109.25 points or 0.64% to 17,014.35.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets as they offloaded shares worth ₹542.36 crore on Wednesday, according to exchange data.
On the domestic macroeconomic front, higher food prices drove retail inflation to a five-month high of 7.4%, while India's industrial production slipped to an 18-month low, contracting by 0.8% in August, mainly due to a decline in output of the manufacturing and mining sectors.
The second consecutive month of rise in consumer price index (CPI)-based inflation will add to the pressure on the Reserve Bank of India (RBI) to again raise interest rates to tame high prices.