Early on Friday, the rupee gained 5 paise to 83.45 against the US dollar after the latter dropped from its high levels and was helped by large inflows of foreign funds. The local unit started at 83.48 on the interbank foreign currency market and advanced to 83.45 versus the US dollar, marking a 5 paise increase over its previous finish.

The rupee recovered some of its early losses on Thursday, closing the day nearly unchanged versus the US dollar at 83.50.

Rising crude oil prices, according to forex traders, limited upside and affected market morale. The benchmark for global oil, Brent crude futures, fell 0.37 percent to USD 87.11 a barrel. "Oil marketing companies are buying crude in anticipation of more price increases; at USD 87 per barrel, Brent oil is under pressure." Amit Pabari, MD of CR Forex Advisors, added, "It also seems the Reserve Bank of India (RBI) is controlling the volatility of the rupee, restricting both its upward and downward movements." The dollar index, which measures the strength of the US dollar relative to a basket of six other currencies, was down 0.12% at 105 at the same time.

"The Dollar Index fell towards 105 levels and US 10-year bond yields dropped towards 4.35 percent, as a series of economic data showed a cooling US economy, thereby heightening the expectations that the US Fed will cut rates sometime soon," Pabari stated.

Regarding the domestic equity market, the 30-share BSE Sensex dropped to 79,663.09 points, a decrease of 386.58 points, or 0.48 percent. To 24,217.30 points, the whole NSE Nifty fell 84.85 points, or 0.35 percent. According to exchange statistics, Foreign Institutional Investors (FIIs) bought shares worth Rs 2,575.85 crore on Thursday, making them net purchasers in the capital markets.