The rupee came under pressure due to extremely bullish dollar sentiment overseas backed by robust US service sector growth data that hit its fastest pace in 12 years in September, coupled with impending Fed rate hike chances.
Sustained capital outflows as well as sluggish equity markets also adversely impacted local forex trade.
Most Asian currencies took a beating amid dollar surge.
At the Interbank Foreign Exchange market, the home currency opened lower at 65.09 from Wednesday's close of 65.01 on fresh demand for the dollar from importers.
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The local unit finally settled at 65.14, showing a loss of 13 paise, or 0.20 per cent.
The rupee briefly touched a high of 64.97 during the trade.
The RBI, meanwhile, fixed the reference rate for the dollar at 65.1758 and for the euro at 76.5685.
Meanwhile, services sector activity in India expanded for the first time in three months in September as it rebounded from GST-related contractions, driven by a surge in new business orders that supported job creation, a monthly survey showed on Thursday.
Meanwhile, local bourses dithered in a dull trade, catching its breath after a spectacular four-day rally on the back of modest profit-taking and also unabated selling by FIIs, dampening overall trading sentiment.
Asian markets too had a mixed session despite overnight record closing highs on Wall Street.
The Sensex dropped over 80 points to end at 31,592.03, while Nifty slipped 26 points at 9,888.70.
Foreign portfolio investors (FPIs) sold shares worth Rs 632.14 crore yesterday, as per provisional exchanges data.
In cross-currency trades, the rupee continued to gain ground against the Pound sterling and ended higher at 85.77 from 86.33 per pound and hardened against the Euro to finish at 76.51 from 76.54 earlier.
However, it declined against the Japanese yen to settle at 57.92 per 100 yens from 57.84 yesterday.
In forward market today, the premium for dollar weakened owing to mild receiving from exporters.
The benchmark six-month premium payable in March edged lower to 128.00-130.00 paise from 132.50-133.50 paise and the far forward August 2018 contract also declined to 267-269 paise from 271-272 paise.
Both crude benchmarks have fallen more than 5 per cent over the last week as investors have booked profits after almost three months of gains.
Brent crude was up 34 cents at USD 56.14 a barrel in early Asian trade. US light crude was up 10 cents at USD 50.08.
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