The rupee weakened against the dollar in late trades on Thursday tracking weakness in the equity markets.
Markets will watch the policy meeting on June 18 and 19 for clues to a rollback of stimulus measures. Fed officials are divided over their ultra-easy monetary policy and some warn it could stoke future inflation and financial instability.
India's gross domestic product growth rate slipped to 7%.
The current valuation of the rupee, which has breached the 64-level against the dollar, is much above the fair value seen by experts.
Stocks smashed previous records as the Sensex on Thursday raced to close at a fresh high of 30,750 zooming 448 points.
Gains in IT shares and Bharti Airtel helped offset losses in HDFC Group shares.
BSE Metal index has spurted by almost 3% followed by counters like Banks, Realty, PSU and Oil & Gas, all gaining by 2% each.
The 30-share Sensex ended up 85 points at 19,496 after hitting an intra-day high of 19,640 and the 50-share Nifty gained 31 points to close at 5,868 after topping the 5,900 mark in intra-day trades.
'A strong foreign exchange reserve is the best safety net against global spillovers.'
This could be attributed to the attractive valuation of the Indian equities after the sharp correction during the first quarter of calendar year 2020 and significant depreciation of the Indian rupee against USD, which provided them a rather good entry point.
Global liquidity expected to continue amid ECB stimulus
The rupee fell to a record low of 59.9350 to the dollar, breaching past its all-time low of 58.98 on June 11.
The 30-share Sensex ended at 18,719 down 526 points or 2.74% and the 50-share Nifty ended at 5,656 down by 166 points or 2.86%.
RBI is committed to bringing down retail inflation to eight per cent by January 2015 and six per cent by January 2016.
Be careful while investing at the current levels and stay away from stocks of leveraged companies.
The BSE Sensex rose on Wednesday to mark a record close as telecom firms such as Bharti Airtel surged on better-than-expected operating performance, while continued strong foreign flows also boosted sentiment.
Forex dealers said besides dollar weakening against the euro in overseas markets, higher opening in the equity market and increased foreign funds inflows mainly supported the rupee.
Investors will keenly watch US Fed meet starting Tuesday
Since its peak, the S&P BSE Sensex has dropped nearly 3,000 points.
The American currency regained its buoyant strength after a brief sideways movement following overnight US Fed's optimistic tone about the future of the US economy
While Raghuram Rajan has said in the past that other factors, including domestic fundamentals, outweigh the US Fed policy meet, this time it would be different
The rupee resumed lower at 54.37 per dollar as against the last closing level of 54.07 at the Interbank Foreign Exchange Market.
Forex dealers said besides dollar's gains against euro and yen overseas, increased demand from oil importers for the American currency and a weak opening in the stock market also put pressure on the rupee.
RBI Governor has been under pressure from Finance Ministry.
A weak dollar overseas ahead of a US Fed policy meeting also aided the rupee recovery while late weakness in domestic equities restricted the rupee's rise, forex dealers said.
Experts believe volatility is here to stay for some time, at least till China stabilises and clarity regarding the US Fed's interest rate move emerges.
The Asian markets are largely trading in the green, taking heart from a positive close on Wall Street.
A sharp fall in dollar overseas, triggered by US Fed's overnight announcement of a fresh round of quantitative easing, and sustained capital inflows into stock markets helped rupee stay in green all through the session.
Markets continued firm trades with buying interest seen in realty, metal and banking shares. The BSE Sensex has gained 386 points (over 2 per cent) at 18,407, after touching a high of 18,456. Nifty is up 118 points at 5,553.
With dollar demand rising, it dropped further to 55.49, before ending slightly better at 55.43 -- a loss of 22 paise or 0.39 per cent over Wednesday.
BSE FMCG and PSU indices gained by almost 1 per cent each.
Among top losers that dragged down key indices were Infosys, TCS, Reliance, SBI, Tata Steel and ITC, falling up to 2.15 per cent.
So far in 2019, India has been one of the highest recipients of foreign flows among Asian and Emerging Market (EM) economies
The rupee on Thursday lost 25 paise to 55.72 against the US dollar in early trade at the InterbankForeign Exchange market as the American currency gained strength against other currencies overseas.
Snapping a four-day gaining streak, the BSE benchmark Sensex on Thursday fell over 57 points in early trade due to profit-booking after recent gains amid a mixed trend in other Asian markets.
Insufficient rainfall will have a negative impact on the economy.
Forex dealers said a higher opening in the domestic equity market and dollar's weakness against other currencies overseas after the US Federal Reserve kept its easing policy unchanged also supported the rupee.
US brokerage Bank of America-Merrill Lynch on Tuesday said its sees the first rate cut this fiscal only in March next as inflation is expected to fall only by December end on a decline in commodity prices driven by the US Fed tapering.
The Reserve Bank has taken some steps to shore up the domestic currency.
The broader NSE Nifty managed to end higher for the second day at 10,426.85, up by 5.45 points or 0.05 per cent after shuttling between 10,478.60 and 10,377.85, intra-day.
