Breaking four straight sessions of gains, the rupee dropped 17 paise on Thursday to close at 60.31 against the dollar due to demand for the US currency from banks and importers.
The Reserve Bank's suspected intervention in the forex market by way of dollar purchasing also weakened the rupee.
"Nationalised banks were buying dollars today, so it is suspected that it was on RBI's behalf. The RBI has been buying dollars for the past two-three days to shore up the forex reserves," said Agam Gupta, MD and Head of Fixed Income Trading, Standard Chartered Bank.
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The greenback was trading higher in overseas markets. The dollar index was up by 0.15 per cent against a basket of six major global units. A forex dealer said the rupee's fall was restricted to a major extent by sustained fund inflows to equities.
At the Interbank Foreign Exchange (Forex) market, the local currency commenced lower at 60.21 a dollar from the last close of 60.14.
The rupee fell to a low of 60.36 during the day following month-end dollar demand from importers, mainly oil refiners, before concluding at 60.31