However, a marginal recovery in local equities and continued capital inflows restricted the rupee fall.
Yesterday, the dollar rallied against its key rivals after the Federal Reserve Released meeting minutes suggesting the pace of labour market gains is getting quicker and improvement in job market might force the Fed to hike key lending rates.
The market is now looking for the outcome of the Friday's Fed Chairwoman Janet Yellen's speech at the Jackson Hole economic conference. The dollar index was trading up by 0.009 per cent against its major global rivals. Full Coverage: Indian rupee vs US dollar, others
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed lower at 60.71 a dollar from previous close of 60.61, nearly a three-week high. It moved side-ways in a range of 60.61 and 60.7950 before settling at 60.67, a fall of six paise or 0.10 per cent.
In straight three sessions, it gained 60 paise or 0.98 per cent.
Pramit Brahmbhatt, Veracity Group, CEO said: "Rupee took a break today and closed weak taking cues from strong dollar as it continues to trade positively for the fourth consecutive day on the outcome of minutes of Federal Reserve's July meeting.
"Also the dollar demand from oil importers and corporates forced the rupee to depreciate. The trading range for the spot rupee is expected to be within 60.20 to 61.00."
Meanwhile, the benchmark S&P BSE Sensex today recovered mostly half of its overnight losses to end up by 45.82 points, or 0.17 per cent. FIIs bought shares worth Rs 251.036 crore yesterday, as per provisional data.
"With Fed scheduled to end its asset purchase programme by October 2014 and string of upbeat economic data (coming in), we may see dollar index strengthening further, which might put pressure on the domestic currency," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
In the forward market, premium dropped further on sustained receipts by exporters.
The benchmark six-month premium payable in January dipped to 221-223 paise from last close of 226.25-228.25 paise.
Far-forward contracts maturing in July, 2015 also moved down to 466-468 paise from 471.5-473.5 paise.
The Reserve Bank of India fixed the reference rate for dollar at 60.7670 and for the euro at 80.5590.
The rupee remained firm against the pound to end at 100.60 from 100.92 previously and also improved further to 58.44 per 100 Japanese yen from 58.69.
It edged up to 80.45 against the euro from Wednesday's close of 80.49.