Rupee weakens after 3-day rally, down 49 paise vs dollar

After three days of relief rally, the rupee on Tuesday came under pressure touching a low of 55.88 on heavy month-end dollar buying by oil companies amid the US dollar gaining strength globally but RBI intervention helped the domestic currency finally close 49 paise lower at 55.67.

At the Interbank Foreign Exchange (Forex) market, the domestic unit opened weak at 55.36 and gradually moved downwards to the day's low of 55.88 as dollar demand emerged. It finally closed at 55.67, down 49 paise over yesterday's close of 55.18.

Sentiments were weighed down as the US dollar turned higher against its major counterparts today as fears over Spanish banks intensified. During European afternoon trade, the dollar approached an almost two-year high against the euro.

"The rupee was actually losing strength despite the three day gains on paper. Today, we saw sustained month-end dollar demand from oil importers and that pulled it down towards the 56-level once again," said treasury head of a state-run bank.

However, there was intervention from the RBI at Rs 55.88 or Rs 55.85 level today, which helped the currency to recoup around 20 paisa in the end, said Hemal Doshi, Chief Currency Strategist, Geojit Comtrade.

The dollar index, indicator of six major currencies, trading higher and New York crude oil trading above USD 91 a barrel in European market today.

The rupee had gained over 82 paise in the last three sessions. It has fallen over 11 per cent since early March driven by a combination of deteriorating global risk sentiment and weak domestic fundamentals.

Meanwhile, the Indian benchmark Sensex closed only 22 points at close.

Photograph: Fayaz Kabli/Reuters