The rupee dropped marginally in trade by 5 paise against the dollar and was trading at 53.86. The currency had gained sharply in the last few weeks following a slew of reform measures announced by the government including a hike in diesel prices.
Last year the rupee was one of the worst performers, thanks to a rising current account deficit. This was despite foreign fund flows into the equity markets surging.
Dealers are expecting the rupee to remain volatile through the year and closely move in tandem with economic data.