Paring initial gains, the rupee recovered to end a tad weaker at 62.42 against the dollar on Thursday after banks sold dollars on behalf of the RBI.
This is rupee’s lowest closing since September 30.
The Indian currency opened marginally higher at 62.35 per dollar against Wednesday’s close of 62.39.
However, it declined to 62.71 per dollar in the early trades after S&P retained its negative outlook on India and also due to dollar demand from banks and oil importers.
S&P said it may cut India's sovereign rating to below investment grade if the new government in 2014 fails to provide a credible plan to reverse the country's low economic growth.
In addition, economic affairs secretary Arvind Mayaram’s comments that about 30-40 per cent of the state-run companies' oil demand has returned to markets added to the rupee woes.
“After touching 62.70 levels, RBI intervened and banks started selling dollars towards the end of the session to support the rupee,” said a dealer with a public sector bank.
On Wednesday, rupee fell sharply by 76 paise on sustained dollar demand amid weakness in the domestic equity market.
The BSE-benchmark Sensex ended weaker by 72 points (down 0.35 per cent) at 20,823 points on Thursday.
Call rates flat; Bonds weaken
The overnight call money rates, rate at which banks borrow short term funds from each other, ended flat from its previous close of 8.75 per cent.
Yield on the 10-year benchmark 7.16 per cent 2023 government bond hardened to 8.85 per cent from its Wednesday’s close of 8.73 per cent. The bond prices closed weaker at Rs 89.26 from Rs 89.44.