Mumbai: The rupee continued to rule weak on Wednesday and closed 8 paise lower at 63.90 against the US dollar due to steady demand for the greenback from importers amidst sliding equities.
Extremely cautious comments from the Reserve Bank Governor Raghuram Rajan over the economic recovery and follow-up rate cuts alongside capital outflows by foreign funds too weighed on sentiments, forex dealers said.
The RBI had on Tuesday cut interest rates by 0.25 basis points for the third time this year.
The local currency even breached the psychological 64-mark briefly during intra-day trade before witnessing some recovery.
The rupee opened modestly higher at 63.77 per dollar at the Interbank Foreign Exchange as compared to overnight closing level of 63.82 and strengthened further to top a high of 63.75.
However, sustained dollar demand from importers and banks kept pressure on the rupee to slip below the 64-mark briefly before rebounding to close at 63.90, showing a loss of 0.08 paise, or 0.13 per cent.
Meanwhile, the benchmark BSE Sensex plummeted further by a hefty 351.18 points to 26,837.20 as intense selling remained unabated after the RBI took a cautious stance on the economic recovery.
Globally, the dollar remained broadly higher against other major currencies with the US dollar index trading up by 0.25 per cent at 96.24.
Veracity Group CEO Pramit Brahmbhatt said the RBI's concerned view over inflation and GDP forced local equities to trade weak and already elevated dollar dented the rupee movement and forced it to trade low for the day.
The trading range for the Spot USD/INR pair is expected to be within 63.50 to 64.30. In the forward market, the premium for forward dollar displayed a mixed trend.
The benchmark six-month premium payable in November moved down marginally to 222.5-224.5 paise from 223-225 paise and forward contracts maturing in May 2016 remained firm at 445-447 as compared to 443-445 on Wednesday.
The RBI fixed the reference rate for the dollar at 63.8515 and for the euro at 71.2838. The rupee dropped further against the pound sterling to 97.71 against 97.24 and slipped against the euro to 71.10 from 70.43 on Tuesday.
It also fell back against the Japanese currency to 51.37 per 100 yen as compared to 51.15 previously.
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