The rupee weakened on Friday, falling 1.3 percent for the week, extending its losing streak to a third successive week, hurt by concerns about a possible pullback in global fund flows and the country's external deficit.
The rupee found support from the central bank's plan to ease hedging rules for exporters and importers, a move which is expected to increase supply of dollars.
Dealers also cited some dollar selling by foreign banks related to Unilever's open offer for its Indian unit. The offer is scheduled to open on June 21, but companies typically bring in dollars prior to the open offer opening.
"Exporter selling is lined up along 55.70-80 levels which will support the rupee. I don't see the rupee falling past 56," said Uday Bhatt, a senior dealer at UCO Bank.
Strong inflows into stocks and debt markets have supported the rupee, having invested over $5 billion in May alone.
The rupee ended at 55.63/64 versus its close at 55.59/60 on Thursday, falling for a sixth successive session. It is also the rupee's longest weekly losing streak since late November.
Some have expressed surprise at the pace of the rupee's fall, and expect the currency to remain under pressure given the rally in dollar and the economic concerns at home, especially after Standard & Poor's reiterated its "negative" outlook on India this month.
In the offshore non-deliverable forwards, the one-month contract was at 55.98 while the three-month was at 56.51.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 55.70 with a total traded volume of $5.9 billion.