The rupee pared most of its losses in late trade after a coordinated cut in policy rates by the US Federal Reserve and other major central banks to prop up the global economy.
The rupee closed 0.2 per cent lower at Rs 48.01 per dollar, up from a six-year low of Rs 48.81 hit in early trade on fears that foreign institutional investors may sell more equities and take dollars out of the country. The rupee was trading around Rs 48.70 when a string of central banks announced easing of monetary policies.
“Sentiment across currency markets is soured by extreme risk aversion,” said Nizam Idris, a Singapore-based foreign exchange strategist at UBS to Bloomberg. “The rupee market is concerned over the large amount of foreign investments that are being pulled out from India as well as elsewhere.”
Ashish Parthasarty, Head of Trading, HDFC Bank, said “we have to wait and see how the markets react over the next two days. (Overseas) equity markets now are down after initially rising in response to the rate cuts."