Rupee off 1-month high, down 20 paise at 67.12 a dollar

The domestic currency retreated sharply from one-month high after a sharp pull-back rally in international crude prices predominantly played a spoilsport and kept the forex sentiment little shaky a day after the RBI raised key interest rates.

The central bank on Wednesday increased key interest rates by 25 basis points to 6.25 per cent - the first such hike in more than four years on worries over inflationary pressures to the domestic economy arising from hardening global crude prices.

For a net oil importer like India, a sustained rise in crude oil price leads to adverse macroeconomic implications.

Besides, concerns of higher US yields and foreign fund outflows from stock and bond markets also added pressure on the rupee front even as corporate demand for the greenback remained strong.

Lingering concerns over a full-blown trade war between the US and its close allies kept exerting downward pressure on the trading front.

The Indian currency had ended at a fresh one-month high of 66.92 yesterday against the US dollar.

"After a stellar recovery in the previous day, the home currency weakened against dollar today as digested the RBI's monetary policy outcome. Pull back in oil has also revived dollar demand. USD, meanwhile, has continued to slip against major currency peers ahead of major central bank meetings next week," Anand James, Chief Market Strategist at Geojit Financial Services, said.

Meanwhile, domestic bourses extended their RBI-induced relief rally on the back of heavy buying in rate-sensitive stocks along with hectic short-covering in beaten-down key counters.

On the energy front, crude prices regained some of the previous session's lost ground, supported by plunging exports following the meltdown in OPEC-member Venezuela’s oil sector.

Brent crude futures, an international benchmark, is trading sharply higher at USD 76.55 a barrel, in early Asian trade.

In the meantime, Moody's Investors Service said it expects India to stick to the estimated fiscal deficit of 3.3 per cent of GDP and even cut capital expenditure to offset any slippage from the budgeted target.

The rupee resumed little changed with negative bias at 66.93 per dollar at the interbank foreign exchange (forex) market on bout of dollar demand.

It lost further ground to hit a session's low of 67.15 in late afternoon deals before ending at 67.12, revealing a steep loss of 20 paise, or 0.30 per cent.

The RBI, meanwhile, fixed the reference rate for the dollar at 67.0181 and for the euro at 79.1015.

The dollar index, which measures the greenback's value against a basket of six major currencies, was down at 93.28.

In the cross-currency trade, the rupee dropped further against the pound sterling to settle at 90.01 per pound from 89.84 and drifted against the euro to end at 79.30 from 78.80 yesterday.

The home unit also fell back after a three-day rally against the Japanese yen to close at 60.98 per 100 yens as compared to 60.74 earlier.

Elsewhere, the euro continued scaling higher against the greenback, supported by hawkish ECB comments, reaffirming that the central bank is likely to announce the timing to end its massive bond-buying program at next week's policy meeting.

The British pound maintained its strong bullish uptrend for the third consecutive day to hit over a two-week high against the US dollar despite ongoing Brexit concerns.

In forward market today, premium for dollar showed a steady to mildly positive trend due to lack of market moving factors.

The benchmark six-month forward premium payable in October ended steady at 110-112 paise, while the far-forward April 2019 contract inched up to 251-253 paise from 251-252 paise previously.