MUMBAI: The rupee pared its initial gains and settled 5 paise lower at its fresh lifetime low of 77.55 against the US dollar on Friday, as inflation concerns and strength of the American currency weighed on the local unit.
Forex traders said the rupee consolidated in a narrow range, as the weakness in regional currencies and depressing economic data weighed on the domestic unit, while intervention from the Reserve Bank of India (RBI) restricted the losses.
At the interbank forex market, the rupee opened at 77.35 against the greenback and moved in a range of 77.26 to 77.55 in the day's trade.
The rupee finally ended at an all-time low of 77.55, down 5 paise from its previous close of 77.50.
On a weekly basis, the rupee has depreciated 65 paise on the back of a stronger dollar index, risk-off sentiment and foreign fund outflows.
''Among all the drivers, the liquidity factor is inevitably a key driver of recent market moves and market participants are rushing for safe-haven assets,'' Dilip Parmar, Research Analyst, HDFC Securities, said.
On Friday, risk appetite remained dismal with the benchmark equity index erasing morning gains and the rupee also surrendered to the dollar, Parmar said, adding ''weakness in regional currencies and depressing economic data weigh on the local unit while intervention from RBI restricted the losses.'' India's headline inflation galloped for a seventh straight month to touch an 8-year high of 7.79 per cent in April on rising food and fuel prices, raising the odds of an interest rate hike by the RBI early next month to tame prices.
With factory output measured in terms of the Index of Industrial Production (IIP) remaining subdued at 1.9 per cent in March, some economists feel that another interest rate hike on the heels of a 40 basis points increase last week may slow economic growth.
On the domestic equity market front, the BSE Sensex ended 136.69 points or 0.26 per cent lower at 52,793.62, while the broader NSE Nifty fell 25.85 points or 0.16 per cent to 15,782.15.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.05 per cent to 104.79.
Foreign institutional investors remained net sellers in the capital market on Friday as they offloaded shares worth Rs 3,780.08 crore, as per stock exchange data.
Brent crude futures, the global oil benchmark, surged 1.56 per cent to USD 109.13 per barrel.
''Rupee consolidated in a narrow range after inflation data released on the domestic front came in higher. But losses for the currency remained restricted as the RBI intervened to curtail volatility,'' said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Dollar has been strengthening in the last couple of sessions as inflation has been on the rise in the US, Somaiya added.