Mumbai, Sep 5 (PTI) The rupee touched its lowest level but pared all losses before ending 3 paise higher at Rs 88.09 against the US dollar on Friday amid sustained outflow of foreign funds and renewed concern over additional US tariffs on Indian IT sector exports.

A weak greenback and falling crude oil prices failed to prevent the fall in the local unit, forex traders said.

At the interbank foreign exchange, the rupee opened at 88.11 against the US dollar and touched the lowest-ever intra-day level of 88.38 before ending the session at 88.09 against the greenback, up 3 paise from its previous close.

The local unit had lost 10 paise to close at 88.12 against the US dollar on Thursday. The unit had recorded its all-time low closing level of 88.15 against the dollar on September 2.

"The rupee fell to its record low on rumour of the Trump administration imposing tariffs on the Indian IT sector, taking shares down and USD/INR pair up. However, as news agencies denied the rumour, the rupee recovered slightly though the dollar was still well bid at 87.25 levels," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

"The markets anticipated that the Reserve Bank of India (RBI) had strongly intervened to keep the rupee up. The rupee has suffered following US President Donald Trump's tariff announcements, and has not been able to recover despite a fall in the US dollar index and rise in Asian currencies, particularly the yuan, with FPIs remaining constant sellers of the currency and equity markets," he said.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.31 per cent to 98.03.

Brent crude, the global oil benchmark, was trading 0.25 per cent lower at USD 66.82 per barrel in futures trade.

On the domestic equity market front, Sensex dipped marginally by 7.25 points to settle at 80,710.76, while Nifty ended with nominal gains of 6.70 points to end at 24,741.

Foreign institutional investors offloaded equities worth Rs 1,304.91 crore on Friday, according to exchange data.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said renewed tariff concerns with US President Trump hinting at targeting Indian IT with additional duties weighed on sentiment.

"Persistent FII selling pressure for the past several months has continued to add to the rupee's devaluation trend. With external headwinds dominating, rupee is expected to remain volatile in the range of 87.90–88.50," he added.

The RBI data released on Friday showed the country's forex reserves jumped by USD 3.51 billion to USD 694.23 billion during the week ended August 29. The overall reserves had dropped by USD 4.386 billion to USD 690.72 billion in the previous reporting week. PTI TRB HVA

Foreign exchange volatility persists as capital outflows and tariff fears pressure the rupee despite central bank support. The rupee briefly hit a record low before closing marginally higher as sustained FII outflows and tariff-related market fears pressured the currency while a softer dollar and lower crude provided limited support; perceived RBI intervention and a rise in forex reserves contrasted with continued capital flight and forecasted near-term volatility.