Forex traders said month-end dollar demand from importers and uncertainty over the US-China trade talks also weighed on the domestic currency.
At the interbank foreign exchange market, the local currency opened weak at 71.63 and during the day, it lost further ground and fell to a low of 71.87.
The rupee finally settled at 71.74, lower by 12 paise against its previous close.
On Thursday, the local unit had settled at 71.62 against the greenback.
On a weekly basis, the domestic unit has lost 3 paise.
Forex traders said investors turned cautious ahead of the release of the Q2 gross domestic product (GDP) numbers. The second-quarter GDP number is scheduled to be announced later in the day.
The Indian economy grew at 5 per cent in the first quarter of 2019-20 -- the slowest pace in over six years.
On the equities front, benchmark BSE Sensex snapped its two-day record-setting streak and tumbled 336 points, or 0.82 per cent lower at 40,793.81. The broader NSE Nifty also settled 95.10 points or 0.78 per cent down at 12,056.05.
Foreign institutional investors (FIIs) purchased shares worth a net Rs 1,008.89 crore on Thursday, according to provisional exchange data.
Traders said, month-end dollar demand from oil importers also weighed on the rupee. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.02 per cent to 98.38.
However, easing crude oil prices supported the domestic unit and restricted its downfall. Brent futures, the global oil benchmark, fell 0.72 per cent to USD 63.41 per barrel.
The 10-year government bond yield was at 6.47 per cent.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.5147 and for rupee/euro at 78.7310. The reference rate for rupee/British pound was fixed at 92.5867 and for rupee/100 Japanese yen at 65.33. DRR MKJ