The Indian rupee weakened by eight paisa against the US dollar on Friday, trading at 90.67, compared with 90.59 on Thursday.
Forex traders said a firm dollar limited the upside for emerging-market currencies, including the rupee. The American currency strengthened on reports that Russia may consider returning to the dollar settlement system as part of a potential economic understanding with the US.
"Such a move, if it materialises, would reinforce the dollar’s dominance in global trade, especially in energy and commodities," CR Forex Advisors MD Amit Pabari said.
"A stronger dollar creates a chain reaction. Most commodities—gold, silver, platinum, copper—are priced in dollars globally. When the dollar rises, these metals become more expensive for buyers using other currencies," he said, adding "and as usual, the rupee feels the pressure too."
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02 per cent higher at 96.94. Brent crude, the global oil benchmark, was trading 0.16 per cent lower at USD 67.41 per barrel in futures trade.
"If inflation is within target and stable, the Reserve Bank of India has less urgency to cut rates aggressively. Fewer rate-cut expectations help support the rupee. So, while the global environment leans dollar-positive, domestic fundamentals are providing some support," Pabari said.
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