Snapping its four-session losing run, the rupee ticked higher by 2 paise to finish at 69.92 against the US dollar Friday.
Forex traders said the domestic unit recovered in the later part of the day amid reports that the US is expected to remove India from its currency manipulation watch list.
According to media reports, the US Treasury Department may name Vietnam as a currency manipulator and is expected to remove India and South Korea from its watch list.
However, rising crude oil prices in the overseas market, sustained foreign fund outflows and continuing sell-off in the domestic equity market weighed on the rupee, forex traders added.
At the Interbank Foreign Exchange (forex) market, the local unit opened at 70.04. It moved in a range of 70.07 to 69.76 before finally ending at 69.92, up 2 paise over its previous close.
The rupee had settled at 69.94 against the US dollar Thursday.
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During the week, the rupee fell by 70 paise.
"The rupee is under pressure as the trade tension escalated between US and China. Global markets are also under pressure hence the rupee is weakening. In coming sessions, volatility is expected to rise in the rupee as the date of election results approaches," said Rushabh Maru, Research Analyst - Currency and Commodity, Anand Rathi Shares and Stock Brokers.
The trade war between the world's two largest economies escalated on Friday after the US more than doubled tariffs on USD 200 billion worth of Chinese products, prompting Beijing to threaten retaliation.
The Trump administration's move comes as high-level officials from both sides are attempting to salvage a trade deal in Washington.
Meanwhile, foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,245.14 crore Friday, according to provisional data.
The dollar index, which gauges the greenback's strength against a basket of six currencies, dipped 0.01 per cent to 97.36.
Brent crude futures, the global oil benchmark, rose 0.65 per cent to USD 70.85 per barrel.
The BSE Sensex slipped for the eighth straight session amid increasing US-China trade tensions. The 30-share BSE benchmark closed 95.92 points, or 0.26 per cent, down at 37,462.99. The broader NSE Nifty shed 22.90 points, or 0.20 per cent, to settle at 11,278.90.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 69.9212 and for rupee/euro at 78.4884. The reference rate for rupee/British pound was fixed at 90.9269 and for rupee/100 Japanese yen at 63.72.