The rupee retreated marginally to end at 66.42 against the US dollar, ending a 6-day winning streak due to mild demand for the American currency.
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Firm US currency sentiment in the overseas market, recovering some ground from the recent slide alongside renewed dollar demand from banks and importers, mainly weighed on the rupee, a forex dealer said.
However, consistent capital inflows and a recovery in local equities helped the local unit to trim initial losses.
The American dollar has been under immense pressure following a string of disappointing US data which lowered expectations of a September rate hike.
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Foreign portfolio investors (FPIs) bought shares worth Rs 854.06 crore yesterday, as per provisional exchange data.
The home unit opened substantially lower at 66.45 against Wednesday’s close of 66.37 at the Interbank Foreign Exchange (forex) market here.
It remained confined in a narrow trading band of 66.39 and 66.49 throughout the day amid lack of market moving factors before settling at 66.42, revealing a small loss of 5 paise, or 0.07 per cent.
The rupee had closed at 66.37- a fresh four-month high of 66.37 yesterday.
The US dollar index was down 0.33 per cent at 94.64 in early trade.
In the meantime, the European Central Bank(ECB) will give a monetary policy announcement later in the day, though expectations are for key interest rates to remain steady.
The euro is trading firm ahead of the decision.
The RBI fixed the reference rate for the dollar at 66.4483 and euro at 74.7676.
In cross—currency trades, the rupee strengthened further against the pound sterling to finish at 88.75 from 88.82 earlier, but dropped further against the euro to end at 74.97 from 74.66.
It also weakened against the Japanese yen to settle at 65.38 from 65.32 per 100 yens yesterday.
Meanwhile, domestic equities made smart recovery after a brief overnight fall to end at 17—month high, despite heavy selling pressure in technology heavyweights spooked by TCS profit warning and weak revenue guidance.
The flagship Sensex surged by 118.92 points to end at 29,045.28, while broader Nifty rose 34.55 points to 8,952.50.
In the forward market, premium for dollar continued drift owing to sustained receiving by exporters.
The benchmark six—month premium for February slipped to 180.5—182.5 paise from 183—185 paise and the forward August 2017 contract also fell to 370.5—372.5 paise from 373—375 paise previously.
Crude prices extended gains after US crude stocks surprisingly plunged by 12.1 million barrels last week, data from the American Petroleum Institute showed after market settlement on Wednesday