The domestic unit opened sharply lower at 53.65/66 and further plunged to 53.92 amid sluggish equities and fears of more capital outflows after reports that government is reviewing taxation treaty tax-heaven Mauritius.
However, suspected strong intervention by the Reserve Bank at day's lower levels forced exporters to cover their short positions. It helped the rupee rebound to a high of 53.4350 before ending at 53.47/48, a fall of six paise.
However, RBI's intervention in the forex market could not be verified independently.
Central Bank of India Deputy General Manager (Treasury) K Eshwar said, "Rupee is likely to be in the current range in the near-term as the weakness continues due to structural issues."
"Though RBI is intervening time to time in the market, it will be difficult for the central bank to intervene frequently as borrowing through repo rate is still above its comfort level," he said.
Meanwhile, Finance Minister Pranab Mukherjee in Manila blamed volatility in global commodity prices for currency depreciation and said deteriorating balance of payment (BoP) situation in several Asian countries also put stress on currencies.
"In several Asian countries, excepting China, the BoP is under stress which leads to currency depreciation," Mukherjee told reporters. More