The rupee declined 14 paise to end weaker at 60.37 against the dollar due to increased demand for the American currency from banks and importers.
The rupee had closed weaker at 60.23 against the greenback on Tuesday.
Wednesday, the rupee opened 5 paise lower on continued sentiments of higher inflation amid mild dollar selling by banks and importers.
Higher inflation figures for March challenged the lowering inflation trend of the last few months. India's March CPI surged for the first time in four months, leaving the RBI with less choice of reducing interest rates.
The domestic unit depreciated to 60.42 against the dollar on persistent dollar demand from state-owned banks. The unit later recovered to 60.20 per dollar on mild dollar selling. However, it pared gains as dollar grew stronger as its demand increased.
Weaker domestic equity markets also led to increased dollar outflow weighing on the rupee. BSE-benchmark Sensex declined 207.70 points (0.92 per cent) over the previous close to end at 22,277.23 points.
Call rates fall; Bond yields harden
Amid high liquidity, the overnight call money rate (the rate at which banks borrow money from each other to overcome short-term liquidity mismatches) ended sharply weaker at 7.05 per cent from Tuesday’s close of 8.50 per cent. The call money market moved in the range of 77 per cent to 8.35 per cent.
The yield on India’s 10-year benchmark 8.83 per cent bond, maturing in 2023, hardened a tad to 8.96 per cent from its previous close of 8.95 per cent on Monday. The price of the bond fell to Rs 99.13 from Rs 99.20. Bond yields and prices move in opposite direction.