Reversing its spectacular three-day rally, the rupeedropped 15 paise to close at 64.46 a dollar on growing concerns with regard to fiscal deficit and possible extension of crude oil production curb by OPEC.
The Indian currency tumbled to a low of 64.63 per dollar during the intra-day trade before regaining some lost ground.
Overall forex market sentiment remained subdued against the backdrop of a steep jump in crude prices and also due to increase in demand for the American currency from importers.
After trading in a tight range early part of the day, the domestic unit drifted sharply lower to hit an intra-day low of 64.63 in late afternoon deals before ending at 64.46, showing a loss of 15 paise, or 0.23 %.
The rupee had appreciated by a whopping 39 paise in the last three days.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.4332 and for the euro at 76.4887.
The forex market will be closed tomorrow on December 1 in view of Id-E-Milad.
With some key macroeconomic data flagging near-term concerns looming over the economy, a caution gripped the forex trading ahead of the Q2 GDP data, which was released after the close of market hours.
The Indian economy expanded by 6.3 % in July- September on the back of a pick-up in manufacturing.
Meanwhile, the official data showed that the country’s fiscal deficit at the end of October hit 96.1 % of the budget estimate for 2017-18, mainly due to lower revenue realisation and rise in expenditure. The deficit was 79.3 % of the full-year target during the same period a year ago.
A sharp sell-off in local stocks also added to rupee woes.
Among other factors, heavy month-end dollar demand from importers along with unwinding of long rupee positions ahead of a long weekend also created some discomfort.
“Market slid and rupee depreciated as widened fiscal deficit and expectation of extension in oil production cut from OPEC influenced investors to offload funds from the market... Investors remain in a cautious note and today’s Q2 GDP data will be a key trigger...,” Vinod Nair, Head of Research, Geojit Financial Services Ltd, said.
Global crude prices rebounded sharply ahead of OPEC meeting in Vienna at which producers are expected to extend a supply-cut deal that came into effect in January with the goal of tightening supplies and propping up prices.
Brent crude was trading at $ 63.90 a barrel after briefly scaling $ 64 mark in early Asian trade.
Domestic equity markets succumbed to heavy sell-offs with both the indices tumbling to multi-month lows as investors squared off positions following end of November series contracts in the derivatives segment amid fresh fears over geopolitical tensions emanating from North Korea.
The flagship Sensex plunged over 453 points to close at 33,149.35, while Nifty tumbled 135 points to 10,226.55.
The rupee opened sharply lower at 64.54 compared to Wednesday’s close of 64.31 in active trade at the Interbank Foreign Exchange (forex) market on immense dollar pressure.
The dollar index, which measures the greenback’s value against a basket of six major currencies, was up at 93.27 in early trade.
In cross-currency trades, the rupee dropped further against the pound sterling to finish at 86.65 from 86.21 per pound and also fell back against the euro to settle at 76.33 from to 76.12 earlier.
The rupee, however, continued to rule firm against the Japanese yen and close at 57.39 per 100 yens as compared to 57.66 on Wednesday.
Elsewhere, the common currency euro suffered a major setback after the Eurozone inflation missed market forecast rising 1.5 % over the year.
The British pound surged to fresh two-month high against the US dollar.
In forward market today, premium for dollar recovered due to mild paying pressure from corporates.
The benchmark six-month premium payable in April edged up to 114-116 paise from 112-114 paise and the far forward October 2018 contract also moved up to 256-258 paise from 254-256 paise on Wednesday..
