Rupee has lost about 17 per cent against the US dollar since its year high in July, and is the worst performing Asian currency in 2011. It touched a record low of 54.30 to the dollar last week.
The Reserve Bank of India and the government have taken measures to support the rupee, including putting curbs on speculative trading, but analysts say some of the steps risk hurting the currency in the long term.
The rupee closed weaker but off its intraday low on Thursday as Sensex and Nifty turned positive after early losses and on signs that the European Central Bank's massive loans to banks will avert a euro zone credit crunch for now.
Some traders cited dollar sales by foreign banks as a reason for the rupee's rebound, while others speculated about possible intervention by the Reserve Bank of India. Demand from oil importers limited the currency's gains, traders said.
The RBI is widely thought to have sold dollars on December 15 after the rupee hit a record low of 54.30 to the dollar, and traders suspect it has been intervening intermittently ever since.
Earlier in the day, RBI Governor Duvvuri Subbarao said the central bank was monitoring foreign exchange markets hourly and would step in to contain any sharp volatility.
"Who would want to invite the RBI's wrath, when room to manoeuvre in the market has already reduced drastically," said a trader at a private sector bank, referring to recent measures taken by the central bank to curb speculative trading.
This, he said, was the main reason that players cut their long dollar positions once the euro and equities reversed course.
"Everybody is afraid of that phone call (from the RBI)," he said.
The euro is seen as the main gauge of global risk sentiment, so is closely tracked by traders in emerging markets such as India.
The rupee ended at 52.72/73 to the dollar, down from Wednesday's close of 52.49/50. It hit a low of 52.90.
"Risk sentiment is still jittery and dollar demand from oil companies has been persistent," said Ravi Kumar, manager foreign dealer at Canara Bank. "Rupee could weaken to around 53.10-53.15 next week as month-end demand from oil companies rises."
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange closed around 52.77, with total volume at $3.76 billion.
The Reserve Bank of India and the government have taken measures to support the rupee, including putting curbs on speculative trading, but analysts say some of the steps risk hurting the currency in the long term.
The rupee closed weaker but off its intraday low on Thursday as Sensex and Nifty turned positive after early losses and on signs that the European Central Bank's massive loans to banks will avert a euro zone credit crunch for now.
Some traders cited dollar sales by foreign banks as a reason for the rupee's rebound, while others speculated about possible intervention by the Reserve Bank of India. Demand from oil importers limited the currency's gains, traders said.
The RBI is widely thought to have sold dollars on December 15 after the rupee hit a record low of 54.30 to the dollar, and traders suspect it has been intervening intermittently ever since.
Earlier in the day, RBI Governor Duvvuri Subbarao said the central bank was monitoring foreign exchange markets hourly and would step in to contain any sharp volatility.
"Who would want to invite the RBI's wrath, when room to manoeuvre in the market has already reduced drastically," said a trader at a private sector bank, referring to recent measures taken by the central bank to curb speculative trading.
This, he said, was the main reason that players cut their long dollar positions once the euro and equities reversed course.
"Everybody is afraid of that phone call (from the RBI)," he said.
The euro is seen as the main gauge of global risk sentiment, so is closely tracked by traders in emerging markets such as India.
The rupee ended at 52.72/73 to the dollar, down from Wednesday's close of 52.49/50. It hit a low of 52.90.
"Risk sentiment is still jittery and dollar demand from oil companies has been persistent," said Ravi Kumar, manager foreign dealer at Canara Bank. "Rupee could weaken to around 53.10-53.15 next week as month-end demand from oil companies rises."
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange closed around 52.77, with total volume at $3.76 billion.
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