The rupee pared initial gains to close flat at 75.65 against the US dollar on Friday as concerns about rising COVID-19 cases weighed on investor sentiment.
Forex traders said risk appetite has waned amid spike in fresh coronavirus infections globally.
The rupee opened on a strong note at the interbank forex market at 75.51 against the US dollar, but pared initial gains and settled at 75.65 against the US dollar, unchanged against its previous close.
During the four-hour trading session, the domestic unit witnessed an intra-day high of 75.43 and a low of 75.65 against the US dollar.
"Despite rising coronavirus concerns, the global equity market is trading higher reacting to new stimulus packages and unconventional easing. But, there is a lot of uncertainty over the spike in COVID-19 cases," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Gupta further said that "the market is trying to figure out the impact of this on consumer activity in coming months, and it is not clear now because we don't know how bad this spike is going to get".
The number of cases around the world linked to the disease has crossed 96.12 lakh and the death toll has topped 4.89 lakh.
Meanwhile, in India, the death toll due to COVID-19 rose to 15,301 and the number of the number of infections rose to 4,90,401, according to the health ministry.
Brent crude futures rose 0.93 per cent to USD 41.43 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.09 per cent to 97.34.
On a weekly basis, the domestic unit as appreciated by 55 paise. It had settled at 76.20 on June 19.
On the domestic equity market front, the 30-share index settled 329.17 points, or 0.94 per cent, higher at 35,171.27, while the NSE Nifty surged 94.10 points, or 0.90 per cent, to 10,383.
Foreign institutional investors were net sellers in the capital market, as they sold equity shares worth Rs 1,050.61 crore on Thursday, according to provisional exchange data.
"After opening on a stronger note rupee came under pressure against the US dollar despite gains in domestic equities. Market participants remained cautious ahead of the important core PCE index and consumer sentiment number that will be released from the US," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Somaiyaa further said that weaker-than-expected economic data could keep broader dollar gains in check. Focus will also be on any update that comes in from the US related to trade tension with China.
According to Rushabh Maru - Research Analyst , Anand Rathi Shares and Stock Brokers, "the rupee has been trading range bound in the last couple sessions. There are no fresh triggers in the market. There is growing concern regarding second wave of the coronavirus as cases are rising across the world. However FIIs inflows may provide respite to the rupee".
Maru further noted that "overall market will focus on coronavirus related development whether second wave emerges or not and India and China border tension."
Meanwhile, the Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.6349 and for rupee/euro at 85.0676. The reference rate for rupee/British pound was fixed at 93.9184 and for rupee/100 Japanese yen at 70.57.