Some traders speculate the Reserve Bank of India (RBI) likely intervened sporadically in the market by selling dollars through state-run banks.
Indian benchmarks also traded higher today. The BSE Sensex witnessed the biggest points gain in nearly two months Thursday, rising 274 points or 1.72 per cent to 16,222. The broader Nifty index advanced 85.75 points to 4,921.
Earlier in the day, dealers said increased dollar demand from importers, especially oil refiners coupled with capital outflows from foreign funds kept pressure on the rupee value against the dollar. Even selling of the American currency by exporters and banks failed to check persistent fall.
RBI had intervened yesterday. But traders see the action by RBI as reluctant to be more aggressive against such a strong down trend. Dealers had told NDTV that the apex bank sold dollars at 55.75/$ levels in a bid to curb the depreciation, they said.
According to Standard Chartered, Rupee may drag to 58.60 levels against the dollar on account of technical weakness. Morgan Stanley, however, expects rupee to cross levels of 60 and touch 62.70/$.
Meanwhile, Finance Minister Pranab Mukherjee says he is disappointed to see that the fluctuation of the Rupee against the dollar is increasing. "Sensex and Nifty figures are also disappointing. Brent crude price has also moved up, and the quantum of India’s imports is quite substantial, around $160 – 170 bn," he said.
He ascribed the rupee's precipitous slide over the past six days to the euro zone crisis and to the global slowdown, adding that the Indian stock markets as well as economic growth have been hit by the slowdown.
"The economic crisis of 2008 and the Euro crisis has impacted all emerging market economies including India. Growth forecasts are being revised downwards the World over," he added.
The rupee touched the symbolically significant level of 56 to the dollar as concerns about the euro zone prompt global risk aversion and expose India's domestic vulnerabilities, most prominently a widening current account deficit and sluggish policy reforms.
The rupee has now fallen more than 5 per cent this year against the dollar to make it the worst-performing Asian currency monitored daily by Reuters. It has dropped more than 13 per cent from its 2012 high reached in February.
Dollar has been appreciating across currencies on concerns over Europe. Euro hit a 21-month low on Wednesday on Greek exit jitters. It fell to $1.2545 after Merkel repeated Euro-bond opposition. Dollar has jumped to its highest levels since September 2010.
(With inputs from PTI, Thomson Reuters 2012)