The Indian rupee weakened on Friday as the greenback extended recent gains and rose to its highest level in nearly five months, while state-run banks' dollar sales helped limit losses, traders said.

The rupee closed at 83.4125 against the U.S. dollar, down nearly 0.3% compared with its close at 83.1850 in the previous session.

The local unit logged its steepest intraday decline in three weeks on Friday and was also down 0.1% week-on-week.

The dollar index climbed 0.5% to a peak of 105.85, its highest since mid-November, on bets that the U.S. Federal Reserve would keep interest rates higher for longer.

A stronger-than-expected U.S. consumer inflation print on Wednesday boosted the dollar and U.S. bond yields.

The rupee opened weaker against the dollar on Friday and hovered between 83.36 and 83.4250 during the session.

State-run banks were mildly selling dollars towards the close of the session, a foreign exchange trader at a foreign bank said. Exporters were also active during the session, helping curb the rupee's losses, the trader added.

Most Asian currencies declined on the day, with the Korean won down nearly 0.8% and leading losses.

Meanwhile, dollar-rupee forward premiums declined, with the 1-year implied yield down 3 basis points (bps) at 1.63%, pressured by elevated U.S. bond yields.

The 1-year Treasury yield inched up to 5.18% while the 10-year yield was last quoted at 4.54%.

The rupee is likely to maintain a "negative trend," over the near term and may test its record low levels, said Arnob Biswas, head of foreign exchange research at SMC Global Securities.

Investors now await remarks from Fed policymakers and India's inflation data, due later on Friday. Retail headline inflation in India is expected to ease to a five-month low of 4.91% year-on-year in March, according to economists polled by Reuters.

(Reporting by Jaspreet Kalra; Editing by Sonia Cheema)