Mumbai: The rupee on Monday nosedived to a three- week low of 54.85 by losing 37 paise against the dollar due to persistent demand for the US currency, amid the government lowering economic growth forecast for the current fiscal.
Continuing its downward march for the fourth straight session, the rupee closed down by 0.68 percent from its previous close at 54.85, after moving in a range of 54.40- 54.89 against the dollar during the day.
The rupee weakened ahead of the RBI's mid-quarterly monetary policy tomorrow, which could impact the local currency, forex dealers said.
Experts said the government lowering the growth projection for the current financial year to 5.7-5.9 percent from 7.6 percent estimated earlier dampened the rupee sentiment.
"The Indian government today lowered the economic growth forecast for the current fiscal to between 5.7 and 5.9 percent from 7.6 percent projected earlier. This could be one of the reasons for rupee's weakness," Abhishek Goenka, Founder & CEO, India Forex Advisors, said.
Internationally, the dollar index was trading below 80.00 and the euro was above 1.3100, and still rupee was seen depreciating. This indicates that the rupee is more driven by the local news and fundamentals, he added.
"The INR weakened to over three week low on dollar demand from foreign banks also weighed is the weaker tone of domestic equity markets which declined on weak growth forecasts by the government," Alpari Financial Services (India) CEO Pramit Brahmbhatt said.
He added that tomorrow's RBI policy will be key to rupee's movement going forward.
Meanwhile, the BSE benchmark Sensex dropped by 73 points to finish at 19,244.42.
Crude oil was up in Asia today on trader expectations of a hike in Chinese crude demand after a key survey showed its manufacturing activity hitting a 14-month high in December, analysts said.
New York's main contract, light sweet crude for delivery in January rose 23 cents to USD 86.98 a barrel.
In Hong Kong market, the US dollar climbed against some major currencies today, most notably against the yen, as a strong electoral verdict for the Liberal Democratic Party in the weekend elections reinforced expectations or further monetary easing from Japan.
The ICE dollar index, which measures the dollar's performance against a basket of six major global currencies, rose to 79.649 in Tokyo afternoon trading from 79.543 late in North America on Friday.
The premium for the forward dollar declined further on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in May moved down to 160-162 paise from last Friday's close of 164-165 paise.
Far-forward contracts maturing in November also ended lower at 304-1/2-306-1/2 paise from 309-1/2-311-1/2 paise.
The RBI has fixed the reference rate for the US dollar at 54.6290 and for euro at 71.8595.
The rupee remained weak against the pound sterling to 88.86 from last close of 87.82 and also dropped further against the euro to 72.16 from 71.35.
It, however, reacted downwards against the Japanese yen to end at 65.53 per 100 yen from previous close of 65.04.