The rupee pared early gains to trade lower at 51.75 against the dollar on outflows related to a stock stake sale.
Dealers attributed the weakening of rupee to dollar selling related to Carlyle Group's stake sale in mortgage lender HDFC.
The Indian unit opened at a near 6-month high of 51.46 against the dollar after the second round of big-ticket reforms approved by the Cabinet on Thursday boosted the sentiment.
After touching an early high of 51.41 on higher foreign capital inflows, the rupee slipped to 51.70 per dollar at 1.10 pm local time.
The Cabinet had yesterday approved 49 per cent foreign direct investment in insurance and pension funds sectors, passed the Companies Bill and amended the Forward Contracts Regulation Act among others in the second wave of reforms.
The rupee had touched a five-and-a-half month high on Thursday breaching 51 levels to end at 51.75 against the dollar.
"The Indian currency is likely to stay around 51-53 levels in the next 2-3 months,'' said Ashish Parthasarthy, Head of Treasury, HDFC Bank.
Experts say that the rupee can sustain the current levels in the longer term provided the intent of the reform announcements is translated into projects and investments.
Call rates and G-Secs
The overnight call money rates were trading at 7.75 per cent. The market opened higher at 7.90 per cent from Thursday’s close of 7.75 per cent.
The 10-year benchmark 8.15 per cent government bond was trading at Rs 99.95 from its previous close of Rs 100 while its yield was almost stable at 8.15 per cent.
