The rupee snapped its two-day upward trend by depreciating a hefty 22 paise to close at 55.43 on Thursday on fresh dollar demand from banks and importers ahead of the US Fed meeting on monetary policy.
The rupee resumed lower at 55.29 per dollar compared to its last closing level of 55.21 at the Interbank Foreign Exchange Market.
With dollar demand rising, it dropped further to 55.49, before ending slightly better at 55.43 -- a loss of 22 paise or 0.39 per cent over Wednesday.
Capital inflows did not provide much relief to the rupee, said dealers.
In the previous two sessions, rupee had gained 23 paise.
"The market is getting cautious ahead of the US Fed FOMC meet.
"The suspense over QE3 is still persisting
with the Asian markets closing mixed and European market trading negative," said Abhishek Goenka, CEO, India Forex Advisors.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said the rupee recouped some of its initial losses towards the fag end on renewed hopes of easing by US Fed and expectations of policy action by the Indian government soon.
In Sydney market, the dollar edged down today ahead of the conclusion of a two-day interest rate meeting at the US Federal Reserve, which may result in the central bank changing its interest rate guidance and announcing more bond buying.
In New York market, the euro rose on Wednesday to its strongest level versus the dollar in nearly five months after Germany's Federal Constitutional Court cleared the way for Berlin to fund its share of any future bailouts.
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The rupee snapped its two-day upward trend by depreciating a hefty 22 paise to close at 55.43 on Thursday on fresh dollar demand from banks and importers ahead of the US Fed meeting on monetary policy.