Dollar demand from importers also weighed on the rupee, which declined for the third straight day, while some weakness in the US currency overseas and increased capital inflows restricted the fall, a forex dealer said.
At the interbank foreign exchange market, the rupee opened lower at 62.25 a dollar from Wednesday's close of 62.09 and dropped further to a low of 62.48 as local stocks fell. However, heavy portfolio investments by foreign funds and a fall in the dollar overseas later helped the rupee recover to a high of 62.07. It closed at 62.11, a drop of five paise or 0.08%. In three sessions, it has dipped by 41 paise. The rupee is at the lowest level since December 3.
The US Fed will cut bond buying by $10 billion to $75 billion a month from January on signals the worlds biggest economy is improving. The step may affect foreign capital inflows into local stocks.
The immediate impact...was the domestic currency going weak against the dollar earlier...However, rupee was seen gaining later in the day on the back of dollar selling by bankers, said Abhishek Goenka, CEO of India Forex Advisors.