Indian rupee down 2 paise vs US dollar at 54.58

Snapping a two-session upmove, the Indian rupee today weakened by two paise to 54.58 against the US dollar due to renewed demand for the US currency from importers and continued capital outflows amid weakness in local equities.

However, a sluggish dollar overseas capped rupee's fall to some extent, forex dealers said.

The local currency commenced the day's trade on a firm note at 54.49 against the dollar from yesterday's close of 54.56 at the Interbank Foreign Exchange (Forex) market.

Later, it hovered in a volatile range of 54.41-54.65 before settling down at 54.56, a fall of two paise over its previous close.

Meanwhile, foreign institutional investors continued exiting Indian stocks and sold shares worth over USD 121.8 million (Rs 664.90 crore) today, according to provisional BSE data.

The BSE benchmark Sensex fell over 211 points to end at seven-month low of 18,226.48.

"The rupee today fell in line with weak equities. After the Cyprus issue, investors are cautious about investing in emerging market economies... Thus, we have been witnessing a flight of FII money from the markets, which hurting the rupee," said K Hariharan, Treasurer at First Rand Bank.

The dollar index, a gauge of six major global rivals, was down by 0.2 per cent.

Hariharan said that very high forward premiums are making it tough for debt markets to attract money, so the rupee is likely to move in the 54.25-55.50 range in near term.

But the export data to be announced later this week will decide the future course of rupee's movement.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Rupee remained volatile today... Looking at the global scenario, rupee is likely to depreciate further this week."

"The negative stock markets put additional pressure on the rupee. Since last couple of days, the FII's have been the net sellers, which is a negative sign for the markets as well as for rupee," said Abhishek Goenka, Founder and CEO, India Forex Advisors.

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