Traders said brisk buying by stockists and jewellery fabricators to meet the rising festive and wedding demand mainly led an upsurge in gold and silver prices.
Sentiment remained bearish as gold fell in global markets after better-than-expected US economic data backed the case for the Federal Reserve to slow stimulus, traders said.
The steep fall in rupee came on a day when the Reserve Bank of India in its first quarter review of monetary policy kept the all key rates unchanged but cut the gross domestic growth forecast to 5.5 per cent for FY'14 from 5.7 per cent earlier.
Meanwhile, retail jewellery sales in India have declined by 50 per cent since gold price started its uptrend nearly two weeks. Buyers deferred their fresh purchase amid expectations of a correction in gold prices from the current high level.
Private banks are assumed to be more efficient at intermediating between depositors and investors.
The currency fell 3.4 per cent this week, and is below the levels at which it was trading on July 15 when the Reserve Bank of India unveiled its cash tightening steps to defend the currency.
First, there has been a significant softening in commodity prices - most notably oil.
The rupee resumed higher at 61.13 per dollar as against yesterday's closing level of 61.40 at the Interbank Foreign Exchange and strengthened further to 60.90 per dollar before ending at 61.05 per dollar, a gain of 35 paise or 0.57 per cent.
Forex dealers said besides the dollar's gains against other currencies overseas, increased demand from importers for the American unit put pressure on the rupee but a higher opening in the domestic equity market capped losses.
Forex dealers said besides dollar's gains against other currencies, increased demand for the American unit from importers put pressure on the rupee, but a higher opening in the domestic equity market limited the losses.
The rupee recovered by 15 paise at 65.49 against the US dollar.
The domestic currency had lost 63 paise to close at over four-month low of 61.18 against the dollar in Friday's trade on weakness in global stock markets and a strong US currency overseas.
During the first US presidential debate, moderator Chris Wallace asked Trump about The New York Times report which revealed that Trump paid $750 in federal income taxes in 2016 and 2017 and also he had paid no income taxes at all in 10 of the previous 15 years starting in 2000.
In forward market today, premium for dollar declined on sustained receivings from exporters.
The rupee ended marginally lower by three paise at 66.36 against the US dollar.
The US dollar surged to fresh one-year high after the Fed chief's testimony to the US Senate on Wednesday bolstered the expectations of interest rate hikes, though gradually.
Markets ended higher, amid firm global cues, and are on track for third straight day of gains.
In recent sessions, shares have rallied on hopes Hindu nationalist opposition leader Narendra Modi, a more business-friendly candidate, is seen coming to power on promises of economic revival and jobs.
Firm equity market failed to restrict the rupee's fall against the dollar
The rupee had gained nine paise to close at nearly one- month high of 61.84 against the dollar in yesterday's trade after the government said in the interim Budget that fiscal deficit this financial year will be capped below target.
Economic recovery in US, euro zone help; new orders sub-index at 52.4
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Markets ended flat on Tuesday, amid a volatile trading session, as investors exercised caution ahead of the two-day FOMC meet starting today and Reserve Bank of India's monetary policy later this week.
Frantic dollar demand from corporates along with an aggressive hedging strategy adopted by importers in the wake of the currency volatility predominately took a toll on the domestic unit despite moves by the central bank to stabilise the currency.
The gains will provide a much-needed reprieve after the rupee fell for a fifth week and hit an over two-month low last week in trade.
Market breadth turned negative with 1,779 declines over 884 advances on the BSE
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Global currency market sentiment is likely to be driven by the US deficit and debt ceiling negotiations, with markets likely to turn more risk averse closer to October 17, the date by which the US Congress must approve raising the country's borrowing limit.
Dealers attributed the rupee's fall to increased demand for the US currency from importers.
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The Reserve Bank of India late on Wednesday unveiled rules to restrict how much its citizens and companies can invest abroad and announced additional curbs on gold imports.
Overall forex market sentiment remained cautious
Fresh dollar demand from banks and importers amidst volatile equities triggered the fall
The 62-year-old Nationalist Congress Party leader was taken into custody shortly before 3 pm after he was questioned for about six hours at the ED office in south Mumbai's Ballard Estate area.
Extending its losing streak for the fourth straight day, the rupee weakened by five paise to 61.01 against the US dollar in early trade today at the Interbank Foreign Exchange market on high demand for the American currency from importers.
India builds up record FX after Fed hints rate hike in future.
In addition to declaring a national emergency, US President Trump has approved major disaster declarations for New York, California, Washington, Iowa, Louisiana, North Carolina, Texas and Florida.
Silver followed suit and traded higher by Rs 200 at Rs 34,200/kg.
The US House of Representatives averted a government shutdown on Thursday, narrowly passing a $1.1 trillion spending bill despite strenuous Democratic objections to controversial financial provisions.
The domestic unit moved in a range of 64.14 and 63.99.
Jewellery stores remained deserted as buyers deferred their non-essential purchases awaiting softness in gold prices.
Forex dealers said apart from month-end demand for the American currency from importers, dollar's gains against other currencies overseas amid US data showing more-than-expected economic growth in the second quarter also put pressure on the local unit.
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