A fall in blue-chips such as Larsen and Toubro on anxiety ahead of the quarterly earnings season and inflation data hurt local shares.
The rupee has fallen 0.8 per cent so far this year, hitting a one-month low on Friday, hurt by a stronger dollar globally as well as caution ahead of key economic data this month.
it was done following the government's approval to increase foreign investment limit in the bank to 62 per cent from 49 per cent.
The partially convertible rupee closed at 62.16/17 per dollar compared to 61.79/80 on Tuesday. Financial markets were closed on Wednesday for Christmas.
The partially convertible rupee closed at 61.79/80 per dollar on Tuesday compared with 61.9525/9625 on Monday. The unit rose to 61.78 during the session, its highest since December 18.
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The rupee resumed slightly lower at 62.05 per dollar as against the last weekend's level of 62.04 at the Interbank Foreign Exchange market. It recovered to 61.88 per dollar before quoting 61.93 at 1045 hours.
Policymakers have been grappling with high prices for food staples such as onions and potatoes even after the central bank raised interest rates by a quarter percentage point in each of its previous two reviews.
Iran can now unlock $4.2 billion of payments for its oil stuck with major clients including India, China, Japan and South Korea after it reached an interim deal with six world powers in November over its nuclear programme.
In Singapore, oil prices eased in Asian trade today on a mixed US inventory report indicating tepid demand, while expectations of a return of Libyan supplies also weighed, analysts said.
Traders are now focussed on the upcoming November trade data, due sometime this week, for near-term direction, with consumer inflation data due out on Thursday, which will help set expectations ahead of the Reserve Bank of India's policy review on December 18.
Traders said good dollar demand from importers including oil companies was seen at stronger rupee levels, limiting any further gains.
With the economy growing at its slowest rate in a decade, India's banking system is facing rising levels of stressed loans, with $100 billion, or about 10 percent of the total, categorised as bad or restructured.
The RBI also asked the oil marketing companies to smoothen their daily dollar demand so that upcoming bunched up demand was covered in advance in forward markets or on days with low dollar demand.
The RBI also asked the oil marketing companies to smoothen their daily dollar demand so that upcoming bunched up demand was covered in advance in forward markets or on days with low dollar demand.
The domestic currency resumed higher at 62.30 per dollar as against the last closing level of 62.41 at the Interbank Foreign Exchange Market and firmed up further to 62.20 a dollar.
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Most Asian currencies weakened versus the dollar with the Thai baht and Philipine peso sliding on disappointing economic data.
The concessional swap windows have attracted about $25 billion, RBI deputy governor HR Khan said on Monday.
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UBS added that its strategists are positively surprised by the scope and tone of the Plenum document.
Most immediately, he pledged to move slowly if needed in winding down an oil window that provides dollars directly to state-run oil companies
The previous bout of Fed withdrawal fears had threatened to spark a crisis of confidence in India -- sending the rupee to a record low of 68.85 in late August and leading to steep falls in bonds and stocks.
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