The rupee failed to hold early gains and fell to 55.15/16 versus its previous close of 55.11/12. The pair had risen as high as 55.0025 in early trade.
Traders estimate some $200 million worth of dollar demand, which they attribute to Cipla, after the drug maker on Wednesday said it would offer $215 million for a majority stake in South Africa's CiplaBSE -0.47 % Medpro.
Traders say sustained demand for the greenback from oil firms are also pulling down the pair.
Domestic shares to be watched for direction as the winter session of parliament kicks off on Thursday. Shares were trading up 0.2 per cent.
