The Indian rupee slipped from a two-month peak on Thursday, ending weaker for the first time in seven days on dollar demand from oil companies and foreign funds in a market cautious about the dollar's rise overseas.
The rupee closed at 45.8750/8900 per dollar, off an intra-day low of 45.97 but weaker than Wednesday's close of 45.8550/8600, which was the highest since July 12.
"There was dollar selling by corporates towards close which helped the rupee bounce from lows," said a dealer at a foreign bank. "But it is likely to trade around current levels as the market is wary about demand from oil companies and a view that the central bank may not be happy with a rapid appreciation."
Earlier, the rupee eased on dollar purchases by state-run banks, possibly for oil companies, and by foreign funds.
Traders said the rupee, which has rallied nearly 1 percent since the start of the week, was taking a breather and was likely to resume its upward climb soon on expectations of increased foreign capital inflows into the rising stock market.
The rupee has risen in recent sessions on increased dollar inflows from arbitrage trade between onshore and offshore markets and on foreign inflows into local shares on hopes of better corporate earnings.
The local currency, which analysts say is overvalued by about 2 percent on a trade-weighted basis, has also been supported by the central bank's move on Saturday to raise banks' cash reserve ratio, which some analysts say may be the beginning of a rate-tightening cycle.