The Indian rupee suffered the worst fall in four months, shedding 3.68 percent in March, hammered by investor jitters over the impact of high global oil prices on an economy still licking the wounds of a fierce inflation battle that has crimped growth and widened deficits.
On the day, the rupee put on a good show aided by a surge in local stocks and dollar sales by exporters trying to cash in on the last session of the 2011/12 fiscal year.
"There is nothing cheerful domestically, and oil prices react in a complex way with the Indian economy. It hurts fiscal deficit, while seeping directly into inflation," said a currency strategist at a foreign bank in Singapore.
"So, even if the global risk sentiment turns positive, rupee may benefit lesser compared with other Asian currencies."
A deputy central banker said on Friday the country needs to deal with inflation to "recreate" high growth.
The rupee ended at 50.87/88 to the dollar, stronger than its 51.39/40 close on Thursday when it fell more than 1 percent mainly due to dollar demand from oil importers.
A more than 2 percent surge in the key share index, after the central bank's surprise bond purchases were seen helping inject liquidity into the sector, also lifted the rupee.
The rupee's 3.68 percent fall in March was its steepest drop since last November's 6.7 percent slide. The currency shed 12.35 percent in the 2011/12 fiscal year, Thomson Reuters data showed.
"Oil is not the only problem," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.
"India has fiscal issues and political instability. So, the rupee is likely to move in a wide range of 50 to 51 (per dollar)for the next one month."
India's current account deficit widened to $19.6 billion in the December quarter from $18.4 billion in the previous period, data on Friday showed.
New Delhi's fiscal deficit during April to February was 94.6 percent of the revised full fiscal year 2011/12 target, compared to 68.6 percent for the same period last fiscal year, data showed.
Finance Minister Pranab Mukherjee is aiming to bring it down to 5.1 percent in the 2012/13 that begins in April after overshooting the current fiscal year's projection by a huge margin.
It could be a tall order considering the government has been unable to restart reforms and was forced to reverse a plan to raise railway fares in light of opposition from its own allies, adding to a year that has seen the ruling coalition weakened by corruption scandals and a big loss in state elections.
Traders are still counting on the RBI to intervene in the forex market to support the rupee in case of any sharp slide.
The RBI has sold a net $19.86 billion from September last year to January to protect the rupee, which touched a record low of 54.30 on Dec. 15, 2011.
The one-month offshore non-deliverable forward contracts were at 51.28 on Friday.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange all ended at around 51.24, on a combined volume of $4.84 billion.