Mumbai: After a short-lived breakout last week, the rupee once again turned shaky and ended lower by 11 paise at 65.04 on fresh bouts of dollar demand from importers and banks despite overall positive vibes in the forex exchange market.
Trading was fairly muted with no underlying trends in place in the truncated trading week ahead of Diwali.
The rupee suffered a near-term set-back and turned volatile after briefly scaling to more than three-week high following extremely bullish macro indicators.
Fresh bouts of demand for the greenback and steady capital outflows amid renewed Fed rate hike fears largely kept sentiment little shaky.
A breathtaking record-setting rally in domestic equities coupled with upbeat export data and narrowing of trade deficit along with softening inflation boosted the currency momentum initially.
India's economic recovery has been patchy of late, post demonetisation and the newly introduced GST regime, but the recent data seems to be suggesting increased optimism, a forex dealer commented.
The GDP expansion hit a three-year low of 5.7 per cent inthe April-June quarter with India losing the fastest-growing economy tag to China for the second straight quarter.
Extending its strong upmove, the rupee resumed firmly higher at 64.75 against last weekend close of 64.93 at the Interbank Foreign Exchange market due to frantic dollar unwinding by exporters and banks.
It later strengthened to hit a fresh intra-day high of 64.69 on easing dollar pressure amid record rally in equities.
However, the recovery momentum seems to be short-lived as the local unit suddely turned weak and retreated sharly to touch a low of 65.16 before ending at 65.04, showing a loss of 11 paise, or 0.17 per cent.
Last week, the rupee had recovered by a sharp 45 paise after a four straight weeks of decline.
The forex market was closed on Thursday and Friday for Diwali.
In the meantime, India's foreign exchange (Forex) reserves kitty increased by USD 1.50 billion in the week to October 13, RBI official data showed.
The Reserve Bank of India's (RBI) weekly statistical supplement released on Friday showed that the overall forex reserves rose to USD 400.29 billion from USD 398.79 billion.
Foreign portfolio investors (FPIs) remained sellers of local equities and offloaded USD 11.95 mln this week.
Meanwhile, the RBI fixed the reference rate for the USD at Rs 65.0649 and euro at Rs 76.5423, respectively.
