Rupee weakens by 48 paise vs USD to close at 54.97

Forex dealers said rupee was under pressure throughout the session as dollar gained against rivals on hopes that European Central Bank (ECB) will cut its main interest rate to a record low in a bid to support the region's economic growth.

At the Interbank Foreign Exchange (Forex) market, the rupee opened sharply lower at 54.80 from the overnight close of 54.49.

It later dropped further to an intra-day low of 55.23 before recovering some lost ground to settle at 54.97, a fall of 0.88 per cent or 48 paise.

"There were no signs of RBI intervention. After rupee firmed in last 3-4 sessions, this kind of pullback happens," said Hemal Doshi, Currency Strategist, Geojit Comtrade.

Market participants said the FII inflows of Rs 430 crore into stocks did not help rupee mark a turnaround today.

"Fall in rupee was due to oil importers' demand along with weakening of Euro against dollar," said N S Venkatesh, Head of Treasury, IDBI Bank.

Reflecting the US currency's strength, the dollar index today was up by 0.22 per cent against a basket of currencies, ahead of the widely-expected rate cut by ECB and more stimulus measures from the Bank of England.

After the Indian forex market closed, ECB cut its main interest rate to 0.75 per cent and its deposit rate to zero. Consequently, the Euro, which had steadied prior to the rate announcement, fell to the lowest levels of the day hitting USD 1.245, down 0.57 per cent.

Meanwhile, the Indian stock market benchmark Sensex today closed up by 75.86 points to 17,538.67, its 3-month high. (MORE)