Mumbai: The rupee fell by 37 paise to close at one-week low of 55.84 against the US currency following fresh dollar demand from importers and banks in the wake of US Fed announcing no new steps to tide over economic crisis.
Dealers said there was sudden spurt of demand for the US currency in the fag-end of trade as investors speculated that there would no special measure by ECB either.
At Interbank Foreign Exchange (Forex) market, rupee opened weak at 55.75 from yesterday's close of 55.47. The dollar gained strength after the US Fed on Wednesday did not announce any new measures to boost its sagging economy, traders said.
However, the rupee quickly recovered to the day's high of 55.63 on back of dollar sales by exporters on hopes that ECB will enact special measures at the end of today's meeting.
There was some support from FIIs also who pumped in Rs 140 crore in local stocks as per provisional data. But the rupee again fell back after mid-session to a low of 55.90 on renewed dollar demand from importers.
It finally concluded at 55.84, a fall of 0.67 percent or 37 paise.
"Rupee weakened today in line with Euro weakening against dollar. The domestic currency is likely to be range bound tomorrow unless some visible trigger comes to give further directions," said B S Keshava Murthy, General Manager (Treasury), Indian Overseas Bank.
As the Indian forex markets closed, European Central Bank kept its benchmark interest rate unchanged at 0.75 percent. Hopes of any new measures were muted from ECB President Mario Draghi, who was expected to speak at a conference later.
"Rupee continued its weakening spree after breaching the low of last four sessions in the last hour today. The dollar index retreated from day's high and was trading lower, pressurising the rupee," said Pramit Brahmbhatt, CEO, Alpari Financial Services (India).
On Friday, rupee will take cue from the outcome of ECB meeting with possible bond purchase road-map, said Hemal Doshi, Currency Strategist of Geojit Comtrade.
Reports said ECB may draw up a mechanism in the weeks ahead to resort to outright purchases to stabilise Eurozone borrowing costs.
Meanwhile, the premium for the forward dollar also turned negative on fresh receivings by exporters.
The benchmark six-month forward dollar premium payable in January settled lower at 181-183 paise from previous close of 185-187 paise.
The premium for far-forward contracts maturing in July also ended down at 326-1/2-328-1/2 paise from 331-333 paise.
The RBI fixed the reference rate for the US dollar at 55.7765 and for euro at 68.3157.
The rupee fell back against the pound sterling to end at 86.89 from Wednesday's close of 86.70 and also moved down against the euro to 68.47 from 68.26.
It too dropped against the Japanese yen to 71.40 per 100 yen from last close of 70.99.