Mumbai: Tracking fag-end selling in stocks, the rupee Monday surrendered initial gains to close with a loss of 16 paise at nearly six-week low of 55.23 against US dollar amid sustained demand of the US currency from oil companies.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced at 55.00 as against last Friday's close of 55.07 but recovered immediately to a high of 54.90 on initial rise in local stocks.
However, it could not maintain its gains and fell back to a low of 55.31 on heavy demand dollar demand from oil importers. It finally ended at 55.23, a fall of 16 paise or 0.29 percent. These levels were not seen since November 27, 2012 when rupee had closed at 55.45 against US dollar.
"There are two drivers why rupee is falling. The worry on current account gap and minimal FII play in stocks. These are now playing out on participants' minds...Oil demand is also a factor. Unless matching FII inflows come, rupee will always be under pressure," said Moses Harding, Head - ALCO and Economic & Market Research, IndusInd Bank.
Immediate resistance for rupee is seen at 55.35 level, said Abhishek Goenka Founder & CEO India Forex Advisors.
The BSE benchmark Sensex Monday washed out all of its early gains and dipped by 92.66 points or 0.47 percent, breaking a four-day gaining streak.
The dollar index, a gauge of six major global rivals, was up by 0.10 percent.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, "The rupee extended its last weekend's weakness during the first session of the week surpassing the previously registered lows tracking weak domestic equity markets and rising dollar index."
India's current account deficit (CAD) widened to record 5.4 percent of GDP in the July-September quarter. A higher CAD has adverse impact on rupee value and affects foreign exchange reserves as well.
The premium for the forward dollar closed either side. The benchmark six-month forward dollar premium payable in June settled better at 165-1/2-167-1/2 from last Friday's level of 167-1/2-169 paise.
However, far-forward contracts maturing in December ended a tad lower at 309-311 paise from 309-1/2-311 paise.
The RBI has fixed the reference rate for the US dollar at 54.97 and for euro at 71.67.
The rupee dropped further against the pound sterling to 88.66 from last weekend's close of 88.21 and also remained negative to end at 72.00 per euro from 71.59.
It, however, fell back against the Japanese yen to 62.83 per 100 yen from previous close of 62.408.
First Published: Monday, January 07, 2013, 20:26