The rupee trimmed its initial gains and was trading weak at 65.53 on heavy capital outflows as fading expectations for an imminent US interest rate hike following Federal Reserve meeting minutes stoked anxiety about the health of the global economy.

The 30-share BSE index Sensex plunged 323.82 points or 1.16 per cent to 27,607.82 and the 50-share NSE index Nifty dropped 122.4 points or 1.44 per cent to 8,372.75 on global risk aversion.

Earlier, the domestic unit resumed higher at 65.16 per dollar against yesterday’s level of 65.27 at the Interbank Foreign Exchange (Forex) market. It further weakened to 65.54 before being quoted at 65.53 at 4.30 pm local time.

It moved in a range of 65.54 and 65.12 in the evening trade.

The dollar was on the defensive against the euro and yen on Thursday, having pulled back sharply after Federal Reserve meeting minutes suggested that policymakers were in no hurry to raise interest rates.

“The dollar fell against most currencies on the back of dovish July FOMC minutes. Lower-than-expected inflation data in US has cast doubts about Fed rate hike next month,” a dealer said.

“Stability of yuan at lower levels after a bout of near 5 per cent depreciation has helped Asian currencies and rupee to stem further depreciation against dollar. The USD-INR pair is expected to trade today in a range of 64.90-65.25 per dollar,” he added.

Crude oil prices fell to a fresh 6-1/2 year low in Asia today approaching the key $40 a barrel level after a surprise rise in US inventories added to concerns of a supply glut.

In New York, the dollar tumbled yesterday after minutes from the July meeting of Federal Reserve policy makers showed that they may not be ready to raise interest rates in September.

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