The rupee depreciated to 60.23 against the dollar as the inflation increased for the month of March, reducing possibility of an interest rate cut by the RBI to support economic growth.
India's wholesale price inflation hit a three-month high in March at 5.7 per cent. Country’s annual consumer price inflation in March also rose to 8.31 per cent driven by higher food prices (food inflation rose to 9.1 per cent).
The rupee had lost 10 paise to close at 60.17 against the US dollar on Friday. Forex and money markets remained closed on Monday.
On Tuesday, the domestic unit opened weaker by 12 paise at 60.29 per dollar against the Friday’s close of 60.17 per dollar due to increased inflation numbers.
The unit further declined to 60.34 as the American dollar gained against other currencies overseas. Increased demand for the American unit from importers also weighed on the rupee, dealers said.
Moreover, the industrial production data, which was released after market hours on Friday, had again slipped into negative and contracted 1.9 per cent in February due to poor performance of manufacturing sector.
The rupee however, recovered to 60.21 per dollar during the day.
Analysts say, the Indian currency is likely to trade in the range 58 to 60 against the greenback.
The yield on India’s 10-year benchmark 8.83 per cent bond, maturing in 2023, ended at 8.95 per cent as compared with its Friday’s close of 8.94 per cent.