At the Interbank Foreign Exchange (Forex) market, the domestic unit opened sharply higher at 54.60 per dollar from its last close of 55.03 on initial surge in stocks.
But soon dollar demand overshadowed the rupee sentiment even as other Asian currencies rose for a second day despite rating agency Fitch downgrading Japan's sovereign rating by one notch to A+ with a negative outlook.
Strong dollar demand from importers pulled rupee down to a low of 55.47. The domestic currency, which has lost over 11 per cent since March this year, today finally closed at 55.39, showing a fall of 0.65 per cent or 36 paise.
Forex dealers said for the second day in a row, there was no RBI role today despite rupee touching new lows. They said capital inflows, the major driver behind rupee's appreciation, were absent in view of the global worries.
Data shows FIIs sold stocks worth Rs 283 crore today. Indian stocks benchmark Sensex closed 157 points lower.
Moses Harding, Head - ALCO and Economic & Market Research, IndusInd Bank said: "While there was genuine demand for dollars from importers, supply is not able to match the demand due to low capital flows."
Yesterday after the currency tumbled by 61 paise or 1.12 per cent, Reserve Bank of India (RBI) imposed restrictions of forward contracts by banks and arbitrage trading.
"Rupee also depreciated due to unwinding of positions today. Also, yesterday's announcement by RBI has short-term negative impact," said T S Srinivasan, GM (Treasury), Indian Overseas Bank.
Finance Minister Pranab Mukherjee in New Delhi said: "The government is taking a series of steps. However, managing rupee is market-related.... There is a lot of volatility.
"As and when RBI will consider necessary they will intervene. It depends on the market forces and market forces are uncertain," he said. (MORE)
