The Indian rupee lost its early gains and tumbled against the U. S. dollar on Thursday as heavy demand for dollar by oil importers helped the weigh on the Indian currency.

The rupee opened at 54.75 per dollar, higher that the previous close of 54.84 per dollar. The gain was on the back of robust capital inflows and sales of the U. S. dollar by banks and exporters.

But, the local currency shed the gain to close weaker at 54.93 per dollar, due to heavy demand for the oil-related foreign currency.

Abhishek Goenka, founder & chief executive at India Forex Advisors, said, "The rupee traded in a thin range for the second straight session. Despite the weakness in the dollar index and a recovery in the euro, the rupee was not seen gaining."

Apart from heavy demand for the U. S. dollar, declines in the domestic equity markets also weighed on the rupee. The rupee touched the intraday high of 54.73 per dollar and intraday low of 54.98 per dollar. Analysts say that the Indian currency will remain volatile in the short run; at least till the Obama administration finds a solution to arrest the country's escalating fiscal cliff.

Concerns about declining rate of economic growth are also weighing on the rupee's strength. The Planning Commission of the country has slashed growth target from 8.2 per cent to 8 per cent. It was the second time that the commission has lowered its growth projection for the economy. In September, it had slashed its growth projection from 9 per cent to 8.2 per cent.