The rupee on Tuesday erased initial gains to closed flat at 54.85 against the US dollar amid Reserve Bank of India keeping key rates unchanged in the mid-quarter policy review.
While the rupee snapped a four-session downslide, it rupee could not cement intra-day gains as RBI kept short-term lending (repo) and cash reserve ratio unchanged, forex dealers said.
At the Interbank Foreign Exchange market, the domestic unit commenced firm at 54.70, which was also the day's high, from overnight close of 54.85.
This early move was attributed to the initial uptick in local stocks amid a weak dollar overseas and persistent foreign fund inflows.
However, it later fell back to a low of 55.05 in late morning session after the Reserve Bank of India left the key rates stable and hinted easing of rates in the next meeting scheduled for January 29.
However, emergence of dollar selling at the fag end and rise in equities helped the rupee to bounce back to settle steady at its Monday's closing level of 54.85.
The dollar index was down by 0.15 per cent against a basket of six major currencies. Foreign institutional investors pumped Rs 922 crore (approx. $170 million) in stock markets today as per provisional BSE data.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The rupee closed stable after disappointment from RBI which maintained a status quo."
We saw rupee drifting lower towards 55.00 levels after the RBI's decision, said Abhishek Goenka, Founder & CEO, India Forex Advisors.
In the last four sessions, rupee had fallen by 59 paise or 1.09 per cent against the dollar.