The rupee on Thursday dipped 4 paise to close at 74.42 against the US dollar, tracking the strength of the greenback in the overseas market after hawkish US Fed minutes.
Investors saw minutes from the Federal Reserve meeting as a sign that the US central bank might hike interest rates faster than anticipated to cool inflation, and this could lead to outflows from the domestic markets, forex traders said.
According to minutes from the Fed's December 14-15 policy meeting, policymakers believe the US job market is nearly healthy enough and ultra-low interest rates are no longer needed.
At the interbank foreign exchange market, the rupee opened weak at 74.44 and witnessed an intra-day high of 74.32 and a low of 74.51 against the US dollar. The domestic unit finally settled at 74.42, down 4 paise over its previous close of 74.38.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.05 per cent up at 96.22. "Dollar gained against most Asian currencies as the market assessed the US Fed's hawkish views. Rupee also felt the heat along with other Asian currencies and depreciated, but the pace was relatively lower as Reliance Industries received good response for their dollar bonds," said Dilip Parmar, Research Analyst, HDFC Securities. Reliance Industries Ltd, the nation's most valuable company, on Thursday said it has raised USD 4 billion (around Rs 30,000 crore) in debt through the largest-ever foreign currency bond issuance by an Indian entity.