Sustained capital inflows, however, could not stem the rupee fall, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic currency resumed the week strong and touched an intra-day four-month high of 60.84 - a level not seen since August 12, 2013 when it had logged a high of 60.45 following firm local equities after BJP won three out of four state Assembly elections.
Investors welcomed the party open heartedly, expecting them to win the next general elections to be held in May next year and widely seen as more stable and business friendly.
Later, renewed fears of the US Federal Reserve tapering its stimulus programme earlier than expected, a firm dollar overseas and sluggish domestic stocks weighed on the rupee and it fell back to a low of 62.28 before settling the week at 62.12, showing a fall of 71 paise or 1.16 per cent. In last three weeks in a row, it had spurted by 170 paise or 2.69 per cent.
Rating agency Fitch on Tuesday said the setback faced by Congress in state elections could potentially raise political pressure on the government's near-term fiscal goals. It could mean an increasing likelihood of political pressure to limit expenditure cut. The benchmark BSE S&P Sensex plunged by 280.95 points or 1.34 per cent during the week while FIIs injected USD 821 million on the first four days of the week, as per Sebi data.
Meanwhile, the Index of Industrial production (IIP) contracted 1.8 per cent in October as compared to an expansion of 1.96 per cent in September and 8.4 per cent a year earlier.
Inflation, as measured by the consumer price index (CPI), rose to a nine-month high of 11.24 per cent in November from 10.17 in October, making it harder for the Reserve Bank to lower interest rates at its upcoming monetary policy meet.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, "To start the week, the rupee rose to four month high, but soon fell back to post first weekly loss in four weeks. The disappointing IIP data further depreciated the rupee. The trading range for the USD/INR pair for the week is expected to be within 61.50 to 63.50."
The rupee premium for the forward dollar ended mixed on alternate bouts of buying and selling.
The benchmark six-month forward dollar premium payable in May finished lower at 246-248 paise from last weekend's close of 248-250 paise, while far-forward contracts maturing in November moved up to 489-491 paise from 485-487 paise.
The RBI fixed the reference rate for the US dollar at 62.1266 and for the euro to 85.4135 from 61.6673 and 84.2546 last weekend, respectively.
The rupee fell back sharply against the pound sterling to 101.14 from last weekend's close of 100.47 and also tumbled against the euro to 85.31 from preceding weekend's close 83.98, while it firmed up further against the Japanese yen to 59.92 per 100 yen from preceding weekend's close of 60.16.