The dollar's weakness against other currencies overseas and a higher opening in the domestic equity market supported the rupee, forex dealers said.
Consumer food price inflation, under a new series published by the government, eased to 5.59 per cent last month from 7.67 per cent in September.
The rupee had hit an intra-day low of 61.6750 on Friday, its lowest level since Oct. 17.
Traders are looking ahead at the consumer prices data due on Wednesday, amid rising expectation the Reserve Bank of India could opt for earlier-than-expected cuts in interest rates should inflation continue to ease.
Despite no change in interest rates, India's largest lender, State Bank of India, last week became among the latest to lower deposit rates, often a precursor to lower lending rates, something some banks have already done for certain consumer loans.
The partially convertible rupee closed at 61.31/32 per dollar, unchanged from its Tuesday close.
The RBI's warnings signal its concern that unhedged firms could be a vulnerable link should global markets buckle.
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In the offshore non-deliverable forwards, the one-month contract was at 61.58, while the three-month contract was at 62.18.
Forex dealers attributed the rupee's fall to increased demand for the US currency from importers and a lower opening in the domestic equity market.
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Companies are legally allowed to invest in markets in India, but the practice has seldom stirred central bank concern until recently, when they have become much more active players.
Forex dealers said besides increased selling of the American currency by exporters and banks, the dollar's weakness against other currencies overseas also supported the rupee, but a lower opening in the domestic equity market limited the rise.
Standard and Poor's raised the outlook for India's "BBB-minus" rating back to "stable" from 'negative,' saying Prime Minister Narendra Modi government's 'strong' mandate would allow it to implement fiscal and economic reforms.
The rupee had gained 2 paise to end at 60.93 against the greenback in Thursday's trade.
The rupee appreciated by 10 paise to close at a nearly six-week high of 60.29 against the US dollar in the previous session tracking a solid rally in local shares and continued dollar selling by exporters and some banks.
Forex dealers said besides increased selling of the American currency by exporters and banks, a higher opening in the domestic equity market and the dollar's weakness against other currencies overseas supported the rupee.
Forex dealers said besides the dollar's gains against other currencies overseas, increased demand from importers for the American unit put pressure on the rupee but a higher opening in the domestic equity market capped losses.
Forex dealers said increased selling of the American currency by exporters and banks supported the rupee but a lower opening of the domestic equity market and dollar's rise against other currencies overseas restricted the gains.
India's fiscal deficit and inflation outlook could prevent any upgrades in the country's sovereign rating, even as the economy is headed for recovery
The rupee had lost 15 paise to hit two-week closing low of 60.68 against the dollar in yesterday's trade on consistent demand for the US currency from importers and some banks on strong global cues.
Forex dealers said besides dollar's gains against other currencies, increased demand for the American unit from importers put pressure on the rupee, but a higher opening in the domestic equity market limited the losses.
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