Mumbai: Retreating from multi-month high, the rupee today plunged by 18 paise to close at 65.03 against the US currency on fresh dollar demand from importers and banks.
Buoyant dollar overseas predominantly impacted trading sentiment, though robust capital flows into equities and debt largely cushioned the fall. This is the biggest one-day fall against the greenback in nearly two months.
The home currency hit a nearly 18-month high of 64.76 in early trade - the level not seen since October 23, 2015 - before retreating sharply in late afternoon trade. Currency traders stayed on sidelines amid extreme caution ahead of the two-day RBI meet and also some key economic data releases later this week, a forex dealer said.
Indian bourses staged a spectacular come back after a consolidation to end at historic high as business sentiment turned extremely bullish following the clearing of four GST supporting bills by Parliament last week amid better global cues.
According to depository data, foreign portfolio investors (FPIs) infused a net sum of Rs 31,327 crore in equities in March and another Rs 25,617 crore in the debt segment, translating into a combined inflow of Rs 56,944 crore (USD 8.7 billion).
Meanwhile, activity in India's manufacturing sector expanded at the fastest pace in five months in March as output and new orders accelerated, a private survey showed.
The domestic unit resumed higher at 64.80 from last Friday's closing value of 64.85 at the Interbank Foreign Exchange (Forex) market and strengthened further to 64.76 on steady dollar unwinding from exporters and speculators.
However, the home currency suffered a sudden jolt in late afternoon deal to skid below 65-mark to touch a intra-day low of 65.09 due to bouts of dollar demand. It finally settled the day at 65.03, revealing a sharp loss of 18 paise, or 0.28 per cent. In worldwide trade, the greenback traded firmly higher against its major rivals in European trading despite a spate of mixed US economic data last weekend.
The dollar index, which tracks the US currency against a basket of six major rivals, was marginally down 0.02 per cent at 100.40. The RBI, meanwhile, fixed the reference rate for the dollar at 64.9103 and for the euro at 69.2788.
In cross-currency trade, the rupee also fell back against the pound sterling to finish at 81.30 from 80.93 per pound and also retreated against the Japanese Yen to settle at 58.38 per 100 yens from 58.01. But, the local currency maintained its momentum against the euro to conclude at 69.28 compared to 69.31.
The forex market will be shut on Tuesday on account of 'Ram Navami'. Meanwhile, country's forex kitty surged by USD 1.15 billion to USD 367.93 billion as of March 24 on the back of increase in the currency assets. On the equity front, the flagship Sensex shot up by 289.72 points to a record closing of 29,910.22.
The broader Nifty also jumped over 64 points to end at a new closing high of 9,237.85. In the forward market today, premium for dollar firmed up on fresh paying pressure from corporates.
The benchmark six-month premium for September moved up to 153-155 paise from 152-154 paise and the far-forward March 2018 contract also edged up to 303.5-305.5 paise from 302-304 paise last Friday.
On the global commodity front, crude oil prices firmed higher influenced by upbeat sentiment about economic prospects in Asia and Europe amid expectations of extended production cuts by Organization of the Petroleum Exporting Countries (OPEC) beyond June.