The rupee on Monday plunged by a hefty 52 paise to slip below Rs. 54-mark for the first time in five weeks on month-end dollar demand from importers and corporates, amid the much-awaited RBI monetary policy review on Tuesday.

A firm dollar overseas, renewed capital outflows and late weakness in local stocks also weighed down on rupee which closed at Rs. 54.08.

The rupee commenced sluggish at Rs. 53.88 a dollar from last Friday’s close of Rs. 53.56 but tried to chart out a recovery in the initial stages as it hit a high of Rs. 53.76.

Heavy demand for dollars from importers, mostly oil firms to meet month-end requirements amid some short-coverings by exporters, however, forced rupee to reverse early gains and fall below the 54-mark.

Bankers said rupee also wilted due to hopes of policy rate cut or announcement of Open Market Operations (OMO) on Tuesday.

The dollar index was up by 0.27 per cent against a basket of six major rivals. These factors kept pressure on rupee throughout the rest of session with the currency touching a low of Rs. 54.09. The rupee finally finished near day’s lowest levels at Rs. 54.08, a fall of 52 paise or 0.97 per cent.

“Rupee managed to cross 54-bar as weakness in equity markets and currencies prompted a short-covering push in dollar,” said Anindya Banerjee, Currency Analyst, Kotak Securities.

The rupee had last settled at 54.38 on September 20, 2012.

The Indian stock market benchmark Sensex, which was up by over 118 points in morning trade, surrendered most initial gains to close a mere 10.48 points higher. FIIs sold stocks worth Rs 77 crore on Monday, as per provisional data.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, “The rupee extended its weakness on global risk-off and weak domestic corporate earnings...the dollar index rose just below the 80.30 levels on safe haven demand due to debt woes from Greece.”

“The rupee closed weaker on the back of weak global sentiments. The rebound in Dollar Index and Euro drifting lower was the main reason behind the rupee weakness,” said Abhishek Goenka, Founder and CEO, India Forex Advisors said.

The premium for the forward dollar remained weak on consistent receipts by exporters.

The benchmark six-month forward dollar premium payable in March ended slightly weak at 131-133 paise from last Friday’s close of 132-1/2--133-1/2.

Far-forward contracts maturing in September dipped to 267-1/2--269-1/2 paise from 271-273 paise.

The RBI has fixed the reference rate for the US dollar at 53.8065 and for euro at 69.4965.

The rupee dropped further against the pound sterling to 86.82 from last close of 86.44 while fell back against the euro to Rs. 69.74 from Rs. 69.63.

It also tumbled against the Japanese yen to 67.94 per 100 yen from previous close of Rs. 66.85.

More In: Markets | Business