Tracking weak stock markets, the rupee on Monday fell back by 16 paise to end at 54.17 against the US dollar as global investors chased the American currency on fears that a bailout of Cyprus will spark off fresh problems in the troubled Eurozone.
Fresh dollar demand from importers and some banks on the back of smart rise in the US dollar ahead of RBI monetary policy meeting on Tuesday also weighed on the rupee, said forex dealers.
At the Interbank Foreign Exchange (Forex) market, the rupee resumed weak at 54.28 a dollar and immediately touched a low of 54.35.
However, late dollar selling by exporters helped the rupee recover some ground and logged a high of 54.11 before settling at 54.17, still a fall of 16 paise or 0.30 per cent.
Last Friday, it had risen by 34 paise or 0.63 per cent.
The dollar index was up by 0.55 per cent against a basket of six major global currencies as investors preferred to exit from euro and went for ‘safe heaven’ dollar.
The Indian stock market benchmark Sensex on Monday tumbled by 134.36 points or 0.69 per cent.
FIIs pumped in over Rs 600 crore (Rs 6 billion) on Monday, as per provisional data with stock exchanges.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said,"Rupee ended weak as equity markets closed down, taking cues from Euro which dropped against the dollar after the news was out that Cyprus plans to impose a one-time levy on bank deposits as part of a sovereign bailout deal."
Investors are widely looking ahead at the apex bank's policy review on Tuesday amid hopes that the bank will cut interest rates by 25 basis points in a bid to support economic growth which will help USD/INR pair to decide its direction, he added.