MUMBAI: The rupee turned weaker after a two-day rise and ended lower by 4 paise at 66.71 against the US dollar in a relatively muted trade on renewed demand for the American currency from banks and importers.
Extreme caution continued to grip forex market sentiment over the likelihood of Fed rate hike announcement at its upcoming policy meet next week.
Moreover, currency traders preferred to stay on the sidelines and avoided taking any long positions ahead of the key event, though good capital inflows into local equities somewhat cushioned the fall.
Foreign funds bought shares worth a net of Rs 920.46 crore yesterday as per the provisional figures from exchanges.
The domestic unit resumed higher at 66.63 as compared to Tuesday's closing value of 66.67 at the Interbank Foreign Exchange (Forex) market on sustained dollar unwinding, also supported by firm local equities.
However, it relinquished those gains in late afternoon deals to hit a fresh intra-day low of 66.7375 and remained stuck in a narrow range most part of the day.
It finally settled the day at 66.71, showing a modest loss of 4 paise, or 0.06 per cent.
On the global front, the greenback traded marginally higher against most of its major rivals, although the cautious stance persist ahead of the ECB monetary policy meeting and the US jobs data on Friday.
The US dollar index was trading firmly higher at 101.95 in late afternoon session.
The RBI fixed the reference rate for the dollar at 66.6362 and for the euro at 70.4011.
In cross-currency trade, the rupee strengthened further against the British pound to end at 81.03 from 81.27 and hardened against the euro to finish at 70.42 from 70.50
yesterday.
It also advanced further against the Japanese Yen to close at 58.49 from 58.50 earlier.