Forex dealers said rupee was under pressure throughout the session as dollar gained against rivals on hopes that European Central Bank (ECB) will cut its main interest rate to a record low in a bid to support the region's economic growth.
At the Interbank Foreign Exchange (Forex) market, the rupee opened sharply lower at 54.80 from the overnight close of 54.49.
It later dropped further to an intra-day low of 55.23 before recovering some lost ground to settle at 54.97, a fall of 0.88 per cent or 48 paise.
"There were no signs of RBI intervention. After rupee firmed in last 3-4 sessions, this kind of pullback happens," said Hemal Doshi, Currency Strategist, Geojit Comtrade.
Market participants said the FII inflows of Rs 430 crore into stocks did not help rupee mark a turnaround today.
"Fall in rupee was due to oil importers' demand along with weakening of Euro against dollar," said N S Venkatesh, Head of Treasury, IDBI Bank.
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After the Indian forex market closed, ECB cut its main interest rate to 0.75 per cent and its deposit rate to zero. Consequently, the Euro, which had steadied prior to the rate announcement, fell to the lowest levels of the day hitting USD 1.245, down 0.57 per cent.
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