The rupee weakened to 67.59 following sudden bouts of dollar demand from importers and banks. Traders remained cautious ahead of gross domestic product (GDP) and fiscal deficit data due later in the day.
The domestic unit opened strong by 4 paise at 67.39 at the interbank forex market today. It hovered in a range of 67.59 and 67.31 before ending at 67.40, down 1 paise at 5 pm local time.
Yesterday, Moody’s had predicted fall in India’s 2018 GDP growth outlook to 7.3 per cent from 7.5 per cent, citing higher oil prices and tighter financial conditions.
Meanwhile, the dollar shed 0.3 percent to 108.60 yen on Thursday morning, edging back towards Tuesday's five-week low of 108.115 yen. Month-end dollar selling from Japanese exporters is also seen as behind the dollar's fall.
The euro won a reprieve on Thursday, holding on to the strong gains it made on Wednesday, as Italian leaders moved to mitigate political turbulence and avoid a potentially disruptive early election.
The 30-share BSE Sensex ended higher by 416.27 points or 1.19 per cent at 35,322.38.