The Indian rupee declined further due to heavy demand of US dollar and sharply rising stock market. The government is said to have purchased dollar in large amount for defense import payouts, as per the traders.

The move picked up demand of dollars, and thus weakened the Indian currency. The State Bank of India is said to have purchased a large number of dollars for such defense payouts.

The Indian rupee, remaining volatile during the week, stood at 48.73/74 per dollar, as compared to 48.68/69 per dollar a day ago. Naveen Raghuvanshi, an associate vice president with Development Credit Bank, said: "The rupee was largely range bound today. There were two large state-run banks continuously seen buying dollars, probably for some public-sector related payments."

Traders believe that Indian currency may become stronger following good results by Citigroup, Bank of America and General Electric, as there may be increased flow of funds in the Indian market.

Raghuvanashi added: "The sentiment on the rupee however is still bullish in the near-term, and we could see it open around 48.50 levels next week. The Citi results would also be watched for direction on global equities."

Meanwhile, the Indian stock market, amid hopes of more financial reforms, surged 3.5 percent on Friday and performed better than leading Asian markets.