The Indian rupee continued to trade in tandem with local stocks and breached the crucial 49-level in early trade today as weak equity markets raised fears of capital outflows amid stronger dollar overseas.
The domestic currency crossed the 49 level for the first time in a month largely due to fears of a slowdown in capital inflows into the country after India's fourth largest software exporter Satyam Computer confessed to its accounts manipulations, leading to a bearish trend in equity markets.
In fairly active trade at the Interbank Foreign Exchange (forex) market, the rupee resumed sharply lower at 49.20/21 a dollar from its previous close of 48.80/81 a dollar but later recovered to 49.00/01 a dollar at 1030 hours.
Forex dealers said the rupee bounced back to a level of 48.87 a dollar after opening 40 paise weaker against the US currency, as local stocks recovered smartly on selective buying by investors.
They said Satyam, however, tumbled by more than 60 per cent and was trading near its face value of Rs 10 per share in early trade.
Despite dollar's firmness against major world currencies in global markets, the rupee staged a smart recovery due mainly to lack of dollar demand in early trade.