The rupee rebounded from its all-time low to close 12 paise higher at 78.94 (provisional) against the US dollar on Friday.
At the interbank forex market, the local unit opened at 78.99 against the greenback and fell to an intra-day low of 79.12.
It finally settled at 78.94, a rise of 12 paise over its previous close.
On Thursday, the rupee had slipped 3 paise to close at a fresh lifetime low of 79.06 against the US dollar.
"The Indian government's effort of tightening exports of oil and imports of gold fell short to change the market mood as the participants remained worried about capital outflows, risk-off sentiments and widening deficit," said Dilip Parmar, Research Analyst, HDFC Securities.
The recent decline in rupee has been roughly in line with other regional currencies. It is likely to remain under pressure in the near future as long as outflows continue with tighter dollar liquidity, Parmar said, adding, "Spot USD-INR is having resistance at 79.30 and support at 78.70 with a bullish bias."
On the domestic equity market front, the BSE Sensex ended 111.01 points or 0.21 per cent lower at 52,907.93, while the broader NSE Nifty declined 28.20 points or 0.18 per cent to 15,752.05.
The dollar index, which measures the greenback's strength against a basket of six currencies, was up 0.30 per cent at 105.
Brent crude futures, the global oil benchmark, rose 1.79 per cent to USD 110.98 per barrel.
Foreign institutional investors remained net sellers in the capital market on Thursday as they offloaded shares worth Rs 1,138.05 crore, as per stock exchange data.