Amid anticipations of Indian rupee touching 45-mark in a short span of time, the local currency turned weaker by a hefty 29 paise to close at 44.64/65 against the US dollar amid a sharp fall in stock markets.
Foreign exchange dealers said demand for dollar picked up again on Friday after a brief pause on Thursday. There was alternate bouts of dollar buying and selling during the day even as Asian equity markets fell sharply.
They said both importers and exporters played a major role amid panic among traders that the rupee may touch 45 level in a short span of time.
The domestic currency traded in a wide range of 44.28 and 44.74 in a volatile trade after resuming weak at 44.58/60 a dollar at the Interbank Foreign Exchange (forex) market. It had closed at 44.35/36 a dollar on Thursday.
Importers as well as exporters covered dollar positions ahead of the weekend, dealers said.
Meanwhile, the benchmark Sensex today tumbled by 415 points, or 2.79 per cent, while Asian indices were down by about 1.0 per cent to 3.0 per cent.
In overseas markets, the dollar, however, fell from highs against major currencies ahead of the August US employment report scheduled to be released on Friday.
The Reserve Bank, however, fixed the reference rate for the US dollar at Rs 44.37 and for the single European currency at Rs 63.41.
The rupee premiums on forward dollar ended higher on sustained paying pressure from banks and corporates.
The benchmark six-month forward dollar premium payable in February ended at 59 - 61 paise, sharply higher from 55-1/2 to 57-1/2 paise on Thursday and the far-forward maturing in August also closed up at 110-1/2 - 112-1/2 paise from 106-1/2 - 108-1/2 paise previously.
In cross currency trades, the rupee strengthened further against the British Sterling and the Euro while it dropped sharply against the Japanese yen.
The rupee surged against the pound sterling to end the day at 78.64/66 per pound from its overnight close of Rs 78.96/98 per pound and also advanced against the single european currency to Rs 63.59/61 per pound from its previous close of Rs 64.16/18 per euro.
The Indian unit, however, tumbled further against the Japanese yen to Rs 42.01/03 per 100 yen from its last close of Rs 40.92/94 per 100 yen.