The Indian rupee plunged to all-time intra-day low of 61.80 against the US dollar on Tuesday but erased all the losses to end with a gain of 11 paise at 60.77 after the RBI is believed to have intervened heavily in the forex market.
The domestic currency resumed lower at 61.05 at the Interbank Foreign Exchange Market and continued its slide to 61.80 amid dollar demand from importers.
Fag-end dollar selling by exporters helped the rupee to recover lost ground and settle at the day's high of 60.77, a gain of 11 paise. The rupee earlier touched an intra-day low of 61.21 on July 8.
A forex dealer said late dollar selling by exporters on hopes of intervention by the Reserve Bank of India (RBI) amid a weakening dollar overseas helped the rupee to rally.
"Towards the end, RBI intervened in the market via staterun banks to support the currency," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India). "Negative sentiment will push down the rupee further to trade near 62 levels in coming days."
The sliding rupee took a toll on the stock markets, with the BSE Sensex plunging over 449 points, or 2.34 per cent. FIIs injected Rs 33.35 crore on Monday and picked up shares worth Rs 212.74 crore on Tuesday, according to the BSE.
"Overnight movements in the US affected the rupee in a big way as fears resurfaced that the Fed may soon start tapering its bond-buying programme. The over-reliance on US events is hitting domestic markets," said Dhanlaxmi Bank Executive Vice-President (Treasury) Srinivasa Raghavan.
On Monday, data showed an acceleration in the pace of growth in US services sector in July, indicating that a rebound in world's largest economy is continuing and may lead the Fed to taper its $85-billion-a-month bond buys soon.
With inputs from PTI