The rupee gave up its initial gains against the dollar by trading down 3 paise at 68.75, following month-end demand for the greenback from importers.
The domestic unit had recovered to 68.65 in early trade today as against Thursday's closing of 68.72 at the Inter-bank Foreign Exchange (forex) market.
It moved in a range of 68.78 and 68.64 before trading at 68.75 at 1102 hours.
The dollar index was down 0.31 per cent at 97.15 against a basket of six currencies in early trade.
The dollar edged down in Asian trade, but is still on track for weekly gains against its major counterparts as investors focused on the two-day meeting of the Group of 20 nations, which kicked off in Shanghai.
In New York yesterday, the dollar strengthened against the yen after official US data showed factories did brisk business in January, reinforcing earlier signs that manufacturing has started to revive after a disappointing fourth quarter.
But it weakened steadily against the euro throughout the session, apparently ignoring volatility in oil prices.
Meanwhile, the benchmark BSE Sensex was trading higher by 99.87 points, or 0.43 per cent, at 23,075.87 at 1107 hours.