At the Interbank Foreign Exchange (Forex) market, the rupee commenced lower at 62.90 a dollar from Wednesday's close of 62.41. Following weak global cues, it immediately touched a low of 62.91 amid month-end dollar demand from oil refiners.
However, it later recovered a high of 62.55 on dollar selling by exporters. The rupee closed at 62.56, logging a fall of 15 paise or 0.24 per cent. In the past two sessions, it had gained 69 paise or 1.09 per cent.
"The rupee ended on a weak note against the dollar as Fed took the decision of cutting the stimulus by USD 10 billion. All the emerging nations were seen getting hit due to this decision," said Abhishek Goenka, CEO, India Forex Advisors.
Across emerging markets, currencies including Brazil's Real, Colombian Peso, Indonesia's Rupiah, Philippine Peso, China's Renminbi, Polish Zloty, Russia's Ruble and Turkish Lira dropped against the dollar on fears of capital outflows.
The dollar index, a gauge of six major global rivals, was up by 0.32 per cent as Fed's USD 10 billion cut is expected to reduce supply of the American currency in the market.
Analysts expect the rupee to remain volatile. Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Expect the Spot USD/INR pair to trade within 62.00 to 63.50."
Meanwhile, the equity benchmark S&P BSE Sensex today dipped by 149.05 points. FIIs pulled out Rs 430 crore from stocks today, after buying Rs 250 crore equities yesterday.
Forward dollar premiums ended mixed.
The benchmark six-month forward dollar premium payable in June softened to 210-1/2-212-1/2 paise from 211-213 paise previously. Far forward contracts maturing in December moved up to 458-1/2-460-1/2 paise from 456-1/2-458-1/2 paise.
The RBI fixed the reference rate for dollar at 62.7335 and for the euro at 85.6075.
The rupee remained firm to end at 103.09 against the pound from 103.31. It improved further to 85.14 per euro from 85.25. It, however, dropped further to 61.04 per 100 Japanese yen from 60.77.