The rupee on Friday closed down by 13.50 paise at a three-week low of 45.38/39 against the US currency after a steep fall in equity markets amid capital outflows.
Fresh dollar demand from importers as well as some banks also put pressure on the rupee.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened subdued at 45.40/41 a dollar from its last close of 45.2450/2550.
It immediately touched the day's high of 45.30 on dollar selling by exporters amid initial stability in stocks.
Later, it dropped to a low of 45.48 on heavy sell-off in local shares before ending the day at 45.38/39 a dollar.
The BSE benchmark Sensex on Friday crashed by 493 points to end at three-week low on all-round selling, extending losses for the fourth straight session.
Renewed dollar demand from banks and importers in view of higher dollar in overseas market mainly affected the rupee value against the dollar, a dealer said.
In New York market, the dollar extended gains against the Euro on Thursday ahead of the release of US employment data for December from the Labour Department later in the day.
Reversing back its initial gains, the dollar index of a basket of currencies was down by nearly 0.02 per cent in European market on Friday.
Meanwhile, global crude oil was trading below USD 89 a barrel in London on Friday.
The rupee premium for the forward dollar remained firm on sustained paying pressure from banks and corporates. The benchmark six-month forward dollar premium payable in June closed better at 136-138 paise from 135-137 paise previously.
Far-forward contracts maturing in December too settled up at 246-248 paise from 244-246 paise on Thursday.
The Reserve Bank of India fixed the reference rate for the dollar at Rs 45.37 and the euro at Rs 58.93.
The rupee fell back to Rs 70.11/13 against the pound sterling from Thursday''s close of Rs 70.04/06 while hardened further to Rs 58.91/93 per euro from Rs 59.27/29 previously.
It also moved up against the yen to Rs 54.34/36 per 100 yen from its last close of Rs 54.44/46.