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The rupee fell 34 paise, its biggest loss in three weeks, to close at 62.22 against the dollar on Tuesday.
The local currency dropped on a day when the equity benchmark Sensex spurted by over 170 points. At the Interbank Foreign Exchange (Forex) market, the rupee commenced lower at 62.02 to the dollar from the previous close of 61.86.
Later, it declined to a low of 62.31, before settling at 62.22, a fall of 34 paise or 0.6 per cent. In the previous two sessions, the rupee rose by 58 paise or 0.93 per cent. Government bonds rallied on the back of renewed buying support from banks and companies.
The 8.83 per cent 10-year benchmark bond maturing in 2023 rose to 100.38 from Rs 100.14 from Monday, while its yield declined to 8.77 per cent from 8.80 per cent. The overnight call money ended higher at 9.00 per cent from Monday's level of 7.05 per cent after touching a low of 7.85 per cent earlier.
