The rupee fell by 11 paise to close at 70.93 against the US dollar on Thursday due to strengthening crude oil prices and dollar demand from importers.
At the interbank foreign exchange market, the domestic currency opened on a strong note at 70.80 a dollar after the US and China signed an initital trade deal. But during the day, the rupee lost momentum and touched a low of 70.98 against the American currency.
The rupee finally settled the day at 70.93, showing a fall of 11 paise over its previous close.
"Indian rupee erased early morning gains and last quoted at 70.93 with loss of 11 paise as dollar buying seen by banks on behalf of the importers," said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities.
"USD/INR pair traded in range of 70.75 - 70.98, as signing of the US-China deal reduced uncertainties that have beset financial markets but it does not end the multi-month long trade war, as further talks shall give trend impetus to currencies globally," LKP Securities Senior Research Analyst (Commodity & Currency) Jateen Trivedi said.
The first phase of the US-China trade deal includes Intellection Property (IP) Protection and Enforcement, ending forced technology transfer, dramatic expansion of American agriculture, removing barriers to American financial services, ending currency manipulation, rebalancing the US-China trade relationship and effective dispute resolution.
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Forex traders said forex outflows and rising crude oil prices also weighed on the domestic currency. Brent futures rose 0.36 per cent to USD 64.23 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.7 per cent to 97.15.
On the domestic equity market front, the 30-share BSE index breached the 42,000 mark for the first time before settling 59.83 points, or 0.14 per cent, higher at 41,932.56. It hit a record intra-day high of 42,059.45.
Likewise, the broader Nifty scaled its lifetime (intra-day) high of 12,389.05. It ended 12.20 points, or 0.10 per cent, up at 12,355.50.
Foreign institutional investors sold equities worth Rs 395.24 crore on a net basis on Thursday, according to provisional exchange data.
The 10-year government bond yield was at 6.60 per cent.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.8753 and for rupee/euro at 78.9097. The reference rate for rupee/British pound was fixed at 92.3756 and for rupee/100 Japanese yen at 64.47.