The rupee failed to hold on to initial gains, which came as the markets cheered the RBI's fresh steps to curb gold imports, and fell four paise to end at a week's low of 59.76 against the dollar following sustained demand from importers and a rise in the US currency overseas.
At the Interbank Foreign Exchange Market, the rupee resumed strong at 59.50, which was the day's high. It later fell on dollar demand from importers, mainly oil refiners, to a low of 59.87.
The rupee recovered a bit during the end to 59.76, a drop of four paise. On Monday, it fell by 37 paise or 0.62%. The rupee closed at 59.89 on July 15.
"The rupee is not able to break the range of 59.30-59.75 levels since last 5-6 sessions. It started the day on a positive note, supported by the measures announced by the RBI yesterday evening," said Abhishek Goenka, founder & CEO of India Forex Advisors.
Seeking to tighten gold imports in the face of a widening CAD, the Reserve Bank on Monday evening set stringent conditions for importers, linking inward shipments to future exports. The restriction came when gold imports, in addition to oil, are putting pressure on the current account deficit, which soared to record high of 4.8% in 2012-13.
In the stock markets, the benchmark S&P BSE Sensex gained for the fifth day, climbing 143 points to close at a 30-month high of 20,302.13. Foreign institutional investors bought a net Rs 211.35 crore, according to provisional data on the BSE.
The dollar index was up by 0.10% against major rivals.
"The trading range for the spot $/Rs pair is expected to be within 59.40 to 60.20," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India) said.