Tracking weak global markets and euro's fall to a two-month low, the rupee on Thursday cut short two-day rally losing 16 paise to settle at 54.36 against the US dollar on heavy demand for the American currency from banks and importers.
While the US dollar continued to steam ahead, buoyed by jitters over Europe's debt crisis, sustained capital inflows worth $50 million from FIIs restricted the rupee's fall to some extent, said forex dealers. At the Interbank Foreign Exchange (Forex) market, the domestic currency resumed sharply lower at 54.55 a dollar from overnight close of 54.20. It immediately dropped further to a low of 54.67 on heavy dollar demand from importers and early steep fall in local stocks.
Later, rupee recovered on smart rebound in domestic stock market to a touch a high of 54.31 before finishing at 54.36 — still showing a fall of 16 paise or 0.30%. In last two days, rupee had surged by 41 paise or 0.75%. "The rupee's fall can be attributed to weak global markets and the steep fall in Euro against the dollar," said Ashtosh Raina, Head - Forex Trading, HDFC Bank.
The euro remained under pressure, falling to over $1.27, its lowest intraday level since September 7, but was eased a tad higher after reports said the Greek parliament passed $17 billion package of extra austerity measures.
Bonds flat in thin volume
Bond yields ended flat on Thursday in choppy trading, with the market likely to remain rangebound ahead of a holiday-shortened week peppered with key macroeconomic data.
The benchmark 10-year bond yield flat at 8.19%, after trading in an 8.18-8.19% range during the day. Trading volumes were at 129.3 billion rupees ($2.39 billion), half that of a usual session, and are likely to remain thin in the coming week given that it will be cut short to three trading sessions due to public holidays.