However, better local equities and some capital inflows helped restrict the fall to some extent, a forex dealer said.
At the Interbank Foreign Exchange market, the domestic currency commenced sharply lower at 61.29 a dollar from previous close of 61.08.
It was trapped in a narrow range of 61.21 and 61.30 before concluding at 61.21, logging a fall of 13 paise or 0.21 per cent.
On Tuesday, it had gained nine paise or 0.15 per cent.
Wednesday's 13 paise drop is its sharpest fall since August 6 when it had depreciated 65 paise against the US dollar.
On Tuesday, government data showed the country's industrial production slowed to 3.4 per cent in June as against 5 per cent in May, while retail inflation rose to 7.96 per cent in July from 7.46 per cent in June.
The benchmark S&P BSE Sensex on Wednesday closed up by 38.18 points, or 0.15 per cent, in see-saw trade.
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