The rupee on Tuesday depreciated by 20 paise to close at 54.37 in line with decline in local equities following withdrawal of support by DMK to the Congress-led UPA government, even as RBI cut repo rate cut.
Sustained dollar selling by exporters amid firm USD overseas also kept the rupee under pressure.
At the Interbank Foreign Exchange (Forex) market, the local unit commenced strong at 54.06 a dollar from previous close of 54.17 and rallied further to over two-week intra-day high of 53.90 on initial rise in stocks and rate cut by RBI.
It later turned bearish in tandem with equities after the news of withdrawal of support by DMK oozed in and fell back to a low of 54.4750 before settling at 54.37, a net fall of 20 paise or 0.37 pct.
The Reserve Bank of India (RBI) today in its mid-quarter monetary policy meeting cut the short-term lending rate (repo) by 25 bps to boost the economic growth and kept the cash reserve ratio (CRR) unchanged.
The central bank, however, indicated limited scope for further easing of rates on account of high food inflation and current account deficit (CAD).
The Indian benchmark today plunged by 285.10 points or 1.48 pct, extending losses for the third straight session while FIIs infused Rs 506.01 crore yesterday, as per provisional data with stock exchanges.