Sinking below the 56-mark during early trade owing to heavy demand for dollar, the rupee on Thursday despite managing to erase some initial losses, ended 13 paise lower at a fresh six-month low of 55.59 amid signs of capital inflows in battered equities and exporters selling the American currency to book profits.
The rupee resumed sharply lower at 55.85 a dollar from Wednesday close of 55.46 on the Interbank Foreign Exchange market as the American unit gained strength on reports that US Federal Reserve Chairman Ben Bernanke has hinted at scaling down the monetary stimulus.
As dollar demand rose, the rupee dropped further to eight-month low of 56.01 before ending at 55.59, a loss of 13 paise, or 0.23 per cent. This is rupee's lowest closing since 55.73 on November 26, 2012.
Even as rupee fell below 56-level against dollar intra-day, Chief Economic Adviser in the Finance Ministry Raghuram Rajan said that there is no need to panic and the RBI takes decisions on whether to intervene in forex markets or not to stabilise the local currency.
Meanwhile, domestic stocks were pounded with BSE benchmark Sensex during the day dropping by 387.91 points to close at nearly two-week low 19,674.33. However, FIIs pumped in over Rs 300 crore in Indian equities as per provisional BSE data.
In london, the dollar and the euro fell by more than two per cent against the yen on Thursday, as investors opted for safe-haven currencies on increasing prospects of the US Federal Reserve paring back its economic stimulus programme.
“As Ben Bernanke said that they might consider cutting down the pace of ongoing QE, we saw Dollar index touching 84.50 levels, and all the other currencies fell against the dollar. After hitting the key level of 56.00 against the US dollar, the rupee was seen appreciating due to selling pressure in the market,” said the Founder & CEO, India Forex Advisors Abhishek Goenka.
Meanwhile, the premium for the forward dollar dropped further on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in October fell to 149-151 paise from Wednesday's close of 154-1/2-156 paise and far-forward contracts maturing in April also declined to 310-312 paise from 317-1/2-319 paise.
The RBI fixed the reference rate for the US dollar at 55.9910 and for the euro at 71.8600.
The rupee fell back against pound sterling to 83.80 from last close of 83.72 and also reacted downwards against the Japanese yen to 54.68 per 100 yen from 53.87. It, however, recovered against the euro to 71.65 from last close.