The rupee slipped back on Friday as the dollar's renewed rally overseas spurred importers to play safe by buying the US currency and triggered a flurry of short-dollar covering ahead of the weekend.
Traders said with concerns about a rapidly widening trade deficit and trade-weighted overvaluation dogging the rupee's outlook, every small gain by the Indian currency had sparked dollar buying by local companies and commodity importers.
The partially convertible rupee fully surrendered its previous session's 0.04 percent gains to end at 45.77/78 per dollar. The currency, which hit a high of 45.69 in the morning, closed at 45.75/76 on Thursday.
"The underlying mood is to buy dollars at every dip and so the moment we saw the rupee move to 45.69 in the morning the demand surfaced," a dealer at a state-run bank said.
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