Analysts said any mass cancellation of the coal blocks could lead to a surge in imports and widen the trade deficit given the impact on domestic production.
The partially convertible rupee closed at 60.30/31 per dollar compared with 60.28/29 on Friday.
The rupee had retreated four paise from its 11-month high levels to close at 58.63 against the dollar on Tuesday on fresh demand for the US currency from importers, amid some profit- booking in stocks.
The rupee had plunged 65 paise in its biggest single-day drop in over six months to end at 61.49 in Wednesday's trade against the greenback, hit by spike in dollar demand and negative cues from local stocks.
Investors turn cautious ahead of upcoming budget
Investors were focussed on the RBI's monetary policy review on Tuesday which will give an insight into its inflation and rates outlook.
Besides, a higher opening in the domestic equity market and strengthening of the euro against the dollar overseas supported the local currency, forex dealers said.
Forex dealers said besides the dollar's gains against the euro overseas, increased demand from importers for the US currency and a lower opening in the domestic equity market also put pressure on the rupee.
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