Rupee struggles to make headway, down 4 paise at 66.71

The rupee turned weaker after a two-day rise and ended lower by 4 paise at 66.71 against the US dollar in a relatively muted trade on renewed demand for the American currency from banks and importers.

Extreme caution continued to grip forex market sentiment over the likelihood of Fed rate hike announcement at its upcoming policy meet next week.

Moreover, currency traders preferred to stay on the sidelines and avoided taking any long positions ahead of the key event, though good capital inflows into local equities somewhat cushioned the fall.

Foreign funds bought shares worth a net of Rs 920.46 crore on Tuesday as per the provisional figures from exchanges.

The domestic unit resumed higher at 66.63 as compared to Tuesday's closing value of 66.67 at the Interbank Foreign Exchange (Forex) market on sustained dollar unwinding, also supported by firm local equities.

However, it relinquished those gains in late afternoon deals to hit a fresh intra-day low of 66.7375 and remained stuck in a narrow range most part of the day.

It finally settled the day at 66.71, showing a modest loss of 4 paise, or 0.06 per cent.

On the global front, the greenback traded marginally higher against most of its major rivals, although the cautious stance persist ahead of the ECB monetary policy meeting and the US jobs data on Friday.

The US dollar index was trading firmly higher at 101.95 in late afternoon session.

The RBI fixed the reference rate for the dollar at 66.6362 and for the euro at 70.4011.

In cross-currency trade, the rupee strengthened further against the British pound to end at 81.03 from 81.27 and hardened against the euro to finish at 70.42 from 70.50 yesterday.

It also advanced further against the Japanese Yen to close at 58.49 from 58.50 earlier.

Meanwhile, domestic bourses witnessed selling for the second straight session as investors turned cautious ahead of exit poll release tomorrow including for the crucial state of Uttar Pradesh and also the much awaited US Fed Reserve policy meet outcome next week.

The benchmark Sensex shed 97.62 points to end at 28,901.94, while broader Nifty fell 22.60 points at 8,924.30.

In the forward market, premium for dollar remained subdued owing to sustained receivings from exporters.

The benchmark six-month premium for August drifted to 151-153 paise from 155-157 paise and the far-forward February 2018 contract also dropped to 305-307 paise from 312-314 paise on Tuesday.

On global commodity front, crude prices continued to slide on growing concerns over US inventory data which showed a double-digit increase last week.