Riding on a strong surge in equity markets, the Indian rupee today pared most of the losses but still ended down by eight paise at 46.48/49 against the US dollar.
Forex dealers attributed the fall in the rupee to short covering of dollar by exporters after the last week's steep decline in the US currency.
The local currency lost 20 paise in early trade on dollar recovery in the overseas markets. The domestic currency bounced back taking cues from stock markets, where the benchmark Sensex surged over 380 points to cross the 17,000-level.
Dealers said the rupee sentiment got a boost from robust industrial output, which grew 10.4 per cent in August strengthening signs of recovery.
The rupee rose to a high of 46.39 during the day before closing at 46.48/49 a dollar.
The local unit had gained 140 paise or 2.93 per cent in the first four day's of the last week. But it eased on last Friday after Federal Reserve Chairman Ben Bernanke said he was thinking of an exit strategy from quantitative easing and low interest rates as the economy improves.
The Reserve Bank, however, fixed the reference rate for the US dollar at Rs 46.58 and for the euro it held steady at its previous level of Rs 68.48.
Rupee premiums on the forward dollar finished lower on continued receivings by exporters.
The benchmark six-month forward dollar premium payable in March ended weak at 63-1/2-65-1/2 paise from 65-67 paise on last Friday and far-forwards maturing in September also closed down at 140-1/2-142-1/2 paise from 143-145 paise previously.
In cross-currency trade, the domestic currency improved further against the pound sterling and the Japanese yen, while eased against the euro.
The rupee strengthened against the pound to end at Rs 73.45/47 per pound from its previous close of Rs 74.18/20 and also hardened against the yen to Rs 51.61/63 per 100 yen from Rs 52.31/33 previously.
It, however, remained weak and fell further against the euro to Rs 68.62/64 per euro from its last close of Rs 68.51/53.
The Bombay Stock Exchange, the National Stock Exchange and Forex markets will remain closed tomorrow for the "General Assembly Elections" for the Constituencies in Maharashtra.
