Rupee falls 29 paise on heavy dollar demand

After a day's respite, the rupee today fell by 29 paise, its biggest single day fall in a week, to end at 56.73 today due to heavy dollar demand from importers amid renewed concerns over withdrawal of US monetary stimulus.

However, some capital inflows and recovery in local stocks cushioned rupee's fall to some extent, forex dealers said.

The local currency commenced the day higher at 56.43 a dollar from yesterday's close of 56.44 at the Interbank Foreign Exchange (Forex) market and immediately touched a high of 56.31 on early dollar selling by exporters.

But it later turned negative on fag-end dollar demand and dipped to a low of 56.70 before settling at 56.73, showing a fall of 29 paise, or 0.51 per cent. This is rupee's biggest fall since May 28, when it fell 39 paise against the dollar.

Yesterday, it had risen by 32 paise, or 0.56 per cent, snapping a five-day losing run where it had lost 119 paise.

"Indian Equity markets traded low throughout the day which depreciated rupee by over 0.50 per cent taking cues from the concerns over the US Federal Reserve's decision about its Quantitative Easing Program (QE), but eventually managed to close in green," Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said.

"Also rupee futures crossed the 57 level for the fourth consecutive day. The trading range for the spot USD/INR pair is expected to be within 56.50 to 57.00," he added.

An early withdrawal of US stimulus may hit dollar inflow in emerging markets like India.

FIIs pumped in Rs 88.49 crore into local equities today, according to BSE provisional data.

The dollar index was also trading almost stable, down by a mere 0.02 per cent, against a basket of six major currencies which has no major impact on the rupee.

"Rupee could not continue with its yesterday's gains and lost momentum against dollar... Rising demand for dollars in the local market continued to put pressure on the rupee," said Abhishek Goenka, Founder and CEO, India Forex Advisors.

Meanwhile, the BSE benchmark Sensex today rose by over 22 points, its first gain in four sessions to end at 19,568.22.