Rupee drops 8 paise to 64.87 verses dollar

Market nervousness over possible fiscal slippages due to a sudden spike in global crude prices along with massive capital outflows added to the volatility.

A modest sell-off in local equities also weighed on sentiment.

The government is scheduled to release the December quarter GDP growth numbers as well as IIP data tomorrow.

The Indian currency traded in a tight range in low volumes and hovered between 64.76 and 64.96.

Overall, the forex market was cautious as traders awaited the highly-anticipated testimony from US Federal Reserve Chair Jerome Powell later today for more clarity on US monetary policy.

Meanwhile, foreign portfolio investors (FPIs) and funds sold shares worth Rs 1,119.51 crore on net basis yesterday.

Maintaining its bearish trend, the rupee opened a tad weak at 64.81 from Monday's close of 64.79 at the interbank foreign exchange market, outweighed by greenback purchases.

It recovered briefly to hit the session's high of 64.76 before drifting sharply to 64.96 in late afternoon deals.

The home unit finally settled the day at 64.87, showing a loss of 8 paise, or 0.12 per cent.

On Monday, the rupee had lost 6 paise versus the dollar.

The RBI, meanwhile, fixed the reference rate for the dollar at 64.8514 and for the euro at 79.9683.

Global crude prices fell back modestly after a brief overnight spike ahead of weekly data that is forecast to show a rise in US crude inventories, although OPEC's ability to curtail production helped stem a larger price slide.

Brent crude futures were trading at USD 67.16 a barrel in early Asian trading.

Domestic equity markets suffered a bearish reversal after a spectacular two-session relief rally.

The benchmark BSE Sensex dropped almost 100 points to end at 34,346.39, while Nifty fell 28 points to 10,554.30.

Globally, the US dollar edged down against most major currencies.

The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 89.80 in early trade.

However, in cross-currency trades, the rupee bounced back against the pound sterling to finish at 90.60 per pound from 91.02 and rebounded against the euro to settle at 79.92 as compared to 79.93 yesterday.

The local currency also recovered against the Japanese yen to close at 60.64 per 100 yens from 60.77 earlier.

Elsewhere, the pound sterling retreated from its early highs to trade modestly weak against the greenback after credit ratings agency Moody's released its Brexit Monitor report, which said growth will ease in 2018.

Euro, however, gained further ground against the US dollar in the face of mixed German inflation numbers.

In forward market today, premium for dollar declined owing to fresh receiving from exporters.

The benchmark six-month forward premium payable in July edged lower to 112.50-114.50 paise from 116.50-118.50 paise and the far-forward January 2019 contract also fell sharply to 237.50-239.50 paise against 243-245 paise previously.