Forex traders said risk appetite has waned and there is growing concern about a resurgence of COVID-19 infections.
The rupee opened weak at 76.10 at the interbank forex market, but recouped most of the losses and finally ended the day at 75.84 against the US dollar, down 5 paise over its last close.
It had settled at 75.79 against the US dollar on Thursday.
During the four-hour trading session, the local unit witnessed an intra-day high of 75.84 and a low of 76.10.
"The stock market was taking the reopening extremely well, but now there's a possibility of a second wave of infections. This has soured market sentiment. Also US Fed provided a weaker assessment of the US economy on Thursday," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Gupta further said that "the uncertainty over coronavirus won't completely fade away unless there's a vaccine. So until then the appreciation in rupee will be limited, and we expect it to remain volatile".
For the first time since the COVID-19 outbreak, India recorded over 10,000 new cases in a day taking the tally to 2,97,535, while the death toll rose to 8,498 with a record single-day spike of 396 fatalities, according to Health Ministry data.
Globally, the number of cases linked to the disease has crossed 75.17 lakh and the death toll has topped 4.21 lakh.
Meanwhile, the 30-share BSE benchmark Sensex was trading 106.68 points lower at 33,431.69 and broader NSE Nifty fell 51.70 points to 9,850.30.
Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs 805.14 crore on Thursday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 0.78 per cent to USD 38.25 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.19 per cent to 96.54. DRR DRR ANS ANS