A lower opening at the domestic equity market and the dollar's rise against other major currencies overseas also put pressure on the rupee, dealers said.
Weakness in the dollar against some currencies supported the rupee.
'The risk is in not being invested and missing out on an upmove.'
Dollar weakness was a major contributor to the rupee recovery as the skittish investors continued to lighten their long positions.
Don't catch falling knives or chase bear rallies no matter how enticing those eight pc green blips look. They may be mouse traps, warns Sonali Ranade
Weakness of dollar in the overseas market also boosted the rupee value.
It is the rupee's biggest single-day gain this year.
From the pandemic shocks to state polls to global trends, a raft of sentiment drivers are expected to steer the Indian stock market in 2022 after a historic year of massive investor returns and milestones. The Union Budget, which will be closely watched for further reform moves, and quarterly earnings of corporates will be among the developments on investors' radar amid global central banks moving towards tighter interest regime in the wake of inflationary pressures. The year 2021 was rewarding in a big way for equity investors.
In the global market, the US dollar index, which tracks the greenback against a basket of six major rivals, was up by 0.33 per cent.
Sharp rate hike in Russia further raised concerns about the global economy.
The Fed's decision on tapering its monthly $85 billion bond-buying programme is expected later on Wednesday.
'Historically, equities have consistently outperformed debt, gold, property, and other assets over a reasonable period.'
Exposure to debt funds and gold is essential even if current returns from these asset classes are low, suggests Sanjay Kumar Singh.
Reacting to market specific developments, the domestic unit touched a low of 66.74 in intra-day trade before concluding at 66.65.
Between Friday's and Monday's close: Yields on 10-year bonds up 6 basis points, rupee slides 13 paise against dollar, Sensex ends flat
A sharp rally in domestic stocks from June lows has once again rendered Indian markets expensive to their emerging-market (EM) peers. The 12-month forward price-to-earnings (P/E) multiple for the Nifty50 Index is around 20.6x - 82 per cent higher than 11.3 per cent for the MSCI EM Index. India's valuation premium has hit a five-month high. This is on the back of sharp outperformance to EM and global peers from June lows and also due to earnings downgrades, following the April-June quarter of 2022-23 earnings.
The rupee showed range-bound movement on Wednesday as investors preferred to stay cautious in the unsure market.
Rupee down 13 paise to 66.72 against dollar
Sustained capital inflows supporting the rupee sentiment, a forex dealer said.
Persistent foreign capital inflows also boosted sentiment.
The rupee had lost 30 paise to close at 61.35 in the previous session on Friday on fresh demand for the US currency from banks and importers due to firm dollar overseas and sharp fall in local equities.
Rupee is under pressure against the dollar say currency watchers.
Capital inflows continued to aid the rupee's rise, although a strong dollar overseas capped the gains.
The Reserve Bank of India (RBI) is precariously balancing two opposing objectives - maintaining easy financial condition in the domestic market, while ensuring external stability - and economists have started taking note. They say India is going through the classic trilemma of the 'Impossible Trinity'. The RBI cannot have an independent monetary policy (setting domestic interest rates) in an environment of an open capital account and flexible exchange rates. What is even more complicated for the central bank now is that financial market stability overlays all the other three objectives.
Weakness in dollar in the overseas market also boosted the rupee value
The rupee has dropped by 60 paise or 0.89 per cent in the last three trading days.
'New record for the Nifty50 is only a question of when.'
The rupee had jumped by 164 paise or 2.39 per cent in previous six trading days.
A weak rupee, though seemingly good for exporters, would push up input cost further for Indian companies.
Invest only if you wish to go overweight on the sector.
Snapping its 3-day winning spree against the American currency, the rupee on Wednesday dropped by 21 paise to end at 66.64 on fag-end dollar demand from banks and importers despite a sharp rally in domestic equities.
Hawkish guidance by the US Fed raises concerns it could tie the hands of RBI from trimming rates.
The demand for the US currency from importers outweighed capital inflows and firm local equities.
Investors seem to be shying away from stocks of companies in the 'digital' space with most counters that comprise the Nifty India Digital index giving negative returns over the past year. The index tracks the performance of a portfolio of stocks that broadly represent the 'digital theme' within basic industries, such as software, e-commerce, IT-enabled services, industrial electronics, and telecom services. The fall in some of these stocks over the past year has been steep; the sharpest decline of around 60 per cent was seen in shares of PB Fintech (parent company of Policybazaar).
Asian stocks sagged on Monday, with risk sentiment dampened as Shanghai shares wobbled after the Chinese markets resumed trading following a four-day long weekend.
The stubbornly high global crude oil prices are opening up a can of worms to heightened inflation risks and likely to disrupt government's fiscal maths along with deteriorating global financial conditions.
On Friday, the rupee had gained 9 paise to close at a fresh one-week high of 67.08.
However, FII outflows of Rs 545 crore (Rs 5.45 billion) capped the gains in the rupee, which had slumped by 126 paise in past two days.
HCL Tech was the top gainer in the Sensex pack, rising over 4 per cent, followed by HDFC Bank, Infosys, NTPC, Nestle India, TCS and HUL. NSE Nifty surged 337.80 points to 14,845.10.
The rupee fell to more than one-month low of 65.75 against the US dollar on Thursday.
