Mumbai: Inching closer to the 56-level, the rupee on Wednesday weakened by five paise to hit a fresh six-month low of 55.46 on continued dollar demand from importers ahead of US Federal Reserve Chairman Ben Bernanke's congressional testimony.
The local currency commenced better at 55.35 a dollar from last close of 55.41 on the Interbank Foreign Exchange market and improved further to a high of 55.33.
Wilting under heavy dollar demand, it fell back steeply to 55.64 before closing at 55.46, a fall of five paise, or 0.09 percent. This is rupee's lowest closing since 55.45 on November 27, 2012.
"A mix of strong US dollar overseas, high import demand, which is seasonal and participant positioning, which was overly short on US Dollar might have been the reason for sharp upside move in the US Dollar against the rupee," said Anindya Banerjee, currency analyst at Kotak Securities.
He added that the rupee is likely to move in the range of 55-55.80 in near-term.
The dollar index was up by 0.13 percent against a basket of six major global rivals.
Meanwhile, the BSE benchmark Sensex today declined by over 49 points to close at a one-week low of 20,062.24.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Dollar demand from gold and oil importers weakened the rupee. Also the equity markets closed lower which further depreciated the rupee. Now the major resistance level for spot USD/INR pair is set on 55.75, which if breached then 56.20 will be the next level to watch."
Later in the day, Bernanke is expected to deliver a testimony before the Congress on the outlook of the US economy.
Banerjee of Kotak Securities said: "Going forward, market would keep a close eye on the US Fed Chairman's testimony to Senate and also US FOMC minutes, both will be scanned for clues about the direction of QE."
Meanwhile, the premium for the forward dollar eased on fresh receiving by exporters.
The benchmark six-month forward dollar premium payable in October softened to 154-1/2-156 paise from Tuesday's close of 155-157 paise and far-forward contracts maturing in April also moved down to 317-1/2-319 paise from 319-321 paise.
The RBI fixed the reference rate for the US dollar at 55.5220 and for the euro at 71.6725.
The rupee recovered gainst pound sterling to 83.72 from last close of 83.92 and also edged up against the Japanese yen to 53.87 per 100 yen from 53.93.
It, however, dipped further against the euro to 71.73 from last close of 71.22.
First Published: Wednesday, May 22, 2013, 18:25