Mumbai: Falling to nearly nine-month low, the rupee on Tuesday closed just shy of 56-level against the dollar after it slumped by 39 paise to end at 55.96, weighed down by month-end demand for the US currency from importers and defence-related purchases.
The dollar strengthening against major currencies overseas also put pressure on the rupee which struggled to recover despite over USD 125 million inflows coming into domestic stocks, forex dealers said.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced weak at 55.68 a dollar from yesterday's close of 55.57 against the dollar.
However, it later recovered to a high of 55.64 but failed to sustain the momentum and dropped to a low of 55.99, on heavy dollar demand from importers, mainly oil refiners to meet their month end requirements, before concluding at 55.96, a fall of 0.39 paise, or 0.70 percent.
The rupee had risen yesterday after a six-day long losing streak, in which it had hit 56.01 last Thursday. This was rupee's lowest level since September, 2012.
"The rupee's fall today was not due to any fundamental reason as such. Some short-term dollar demand due to month end and defence-related purchases pulled it down. Also concerns of GDP numbers, which will be announced later this week, falling below market expectations also hit the currency," said K Hariharan, Treasurer at First Rand Bank.
The dollar index was up by 0.06 percent against a basket of six major currencies.
"The trading range for the USD/INR pair is expected to be within 55.75 to 56.25," Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said.
Meanwhile, BSE benchmark Sensex today rose by 130 points to close at a 1-week high of 20,160.82.
Foreign institutional investors pumped in Rs 711.12 crore (over USD 127 million) into local equities today, according to BSE provisional data.
"The rupee was seen coming very close to its key level of 56.00 on the back of dollar buying pressure in the local market. Strength in the US dollar and weakness in the Asian currencies also hurt the sentiments.
"Going ahead, today's economic data from the US will give further cues to the movement in the dollar index, the effect of which will also be reflected in the rupee," said Abhishek Goenka, Founder and CEO, India Forex Advisors.
Premium for forward dollar recovered slightly on fresh stray payments from banks and corporates.
Benchmark six-month forward dollar premium payable in October edged up to 145-147 paise from previous close of 144-1/2-146-1/2 paise and far-forward contracts maturing in April also rose to 304-1/2-306-1/2 paise from 302-1/2-304/1-2 paise.
The RBI fixed the reference rate for the US dollar at 55.7423 and for the euro at 72.0265.
The rupee fell back against pound sterling to 84.61 from overnight close of 84.08 and also turned negative against the euro to end at 72.40 from 71.93.
It, however, recovered against against the Japanese yen to 54.86 per 100 yen from 55.04.
First Published: Tuesday, May 28, 2013, 18:47