Tracking stock market movements, the rupee today breached 56-level against dollar but recouped early losses to close at 55.75 on fag-end selling of US currency by banks and exporters.
The rupee opened sharply lower at 56.15 per dollar as against the last closing level of 55.84 per dollar at the Interbank Foreign Exchange (Forex) Market. Global markets tanked after ECB yesterday evening did not announce the much-awaited steps to tackle Eurozone debt crisis.
As the local stock market wilted under selling pressure, the pressure on rupee increased and it touched 56.19 amid strong demand of dollar from banks. However, rupee recovered at the fag-end of the day to 55.72 before ending at 55.75, showing a gain of 9 paise over yesterday’s closing level.
“Initial rupee depreciation was largely due to no action from the ECB side. So, rupee weakened in sync with the euro weakening against dollar. However, as European stocks rebounded, Indian shares took cue pushing up rupee,” Hemal Doshi, Currency Strategist, Geojit Comtrade said.
The late strength in rupee was also on account of some custodial flow of dollars from foreign banks, said N S Venkatesh, Head of Treasury, IDBI Bank, adding there was no sign of RBI intervention.
Provisional data shows FIIs pumped in Rs 208 crore in stocks. The Indian benchmark Sensex declined by 26 points to end at 17,197.93 after dropping nearly 200 points intra-day.
Abhishek Goenka, CEO, India Forex Advisors said, the market is expected to remain volatile as every positive or negative news in the domestic and international market would impact the rupee.