However, strengthening of other currencies against the US dollar overseas cushioned rupee's fall to some extent, forex dealers said.
Foreign institutional investors pulled out a massive Rs 1,269.43 crore, or nearly USD 233.5 million, from domestic equities, according to BSE provisional data.
The local currency resumed higher at 54.15 against the dollar from yesterday's close of 54.22 at the Interbank Foreign Exchange (Forex) market.
However, it failed to maintain earlier gains and ended down at 54.37 on fag-end dollar demand from oil refiners, showing a loss of 15 paise or 0.28 per cent, from its last close. It moved in a range of 54.15 per dollar and 54.41 per dollar during the day.
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"Globally, the Euro is still hovering near 1.30 levels and dollar index is trading above 82.50 levels," said Abhishek Goenka (Founder & CEO, India Forex Advisors).
In the global market, the US dollar fell against key rivals in the early trade, as investors monitored Japan's monetary-policy meeting and awaited quarterly growth figures from the US.
The ICE dollar index, a measure of the greenback against a basket of six other currencies, fell to 82.576 from 82.813 on late Thursday.