The rupee snapped a three-day rising streak to end down on Wednesday, after see-sawing through the day, tracking choppy shares, with dollar demand from oil importers and a weak euro weighing.

The rupee closed at 51.90/91 to the dollar, 0.4 percent weaker than Tuesday's close of 51.70/71, after moving in a 51.53 to 51.92 band.

A fragile European economy could further hurt sentiment and keep investors at bay, dragging the rupee lower against the dollar in coming days, traders said.

The rupee has risen 2.5 percent in the three sessions to Tuesday, largely buoyed by foreign funds buying into local debt, before the limits they won to buy such paper expire in mid-January.

I do acknowledge that recent gains in the rupee is due to buying of shares and inflows by FIIs, but these are early days, said Suresh Kumar Ramanathan, regional rates and foreign exchange strategist for CIMB Investment Bank in Kuala Lumpur.

It's looking like portfolio adjustment play rather than some form of medium-term bullish play, he said.

The euro hit a session low against the dollar on Wednesday after Fitch ratings agency said the European Central Bank should do more to solve the region's debt crisis.

We will need to see how it (the rupee) plays out post the expiry of the government security limits in the coming few days, a senior dealer with a foreign bank said, when asked if the rupee rally was short-lived.

Indian shares closed little changed in cautious and choppy trading ahead of industrial output data due on Thursday and quarterly results that are expected to show a slowdown in earnings growth.

Oil is India's largest import item and dollar demand from oil refiners also weighed on the rupee, traders said.

Dealers will closely watch the industrial output print, due Thursday, for further cues on the economy and likely central bank move on Jan 24.

India's industrial output likely rose at an annual rate of 2.2 percent in November, boosted by a rise in infrastructure sector output and auto sales, a Reuters poll forecast.

One-month offshore non-deliverable forward contracts were quoted at 52.27, indicating some weakness in the short-term in the onshore spot rate.

In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all around 52.13 on total volume of $5.2 billion.