The rupee pared its initial gains and settled down by 9 paise at 81.35 (provisional) against the US dollar on Friday as the support from weak dollar was negated by weak domestic markets and a surge in crude oil prices.
Forex traders said foreign fund outflows also weighed on investor sentiments.
At the interbank foreign exchange market, the local unit opened at 81.11, but pared the gains and ended at 81.35, down 9 paise over its previous close.
During the day, the local unit witnessed an intraday high of 81.08 and a low of 81.35. On Thursday, the rupee appreciated by 4 paise to close at 81.26 against the US dollar.