The rupee continued its downslide for the third day in a row and declined by 19 paise to end at 56.15, its second lowest closing in history, against the US currency as cautious importers bought dollars in late trade ahead of the outcome from the key US Federal Reserve meeting.
At the Interbank Foreign Exchange market, the domestic unit opened higher at 55.92 a dollar from previous close of 55.96 and immediately touched a high of 55.82 on dollar selling by exporters and initial rise in local shares.
However, as the session progressed it weakened and fell back to a low of 56.18 before concluding at 56.15, its second lowest closing.
On May 30, the rupee had settled at 56.23 on May 30, 2012. It has depreciated over 16 per cent since early March and hit a record low of 56.52 (intra-day) on May 31.
Forex dealers said some weakness in dollar overseas, renewed capital inflows
and positive closing of local stocks capped the negative sentiment against the rupee.
"Though rupee was range bound through out the day, it depreciated during the end due to sudden demand of dollars," said Hemal Doshi, Currency Strategist, Geojit Comtrade.
Moses Harding, Head - ALCO and Economic and Market Research, IndusInd Bank said, "Also, as the Fed is less likely to come up with a pleasant surprise (like QE3), Indian operators are cautious in taking position,".
The euro rose marginally to $1.27, after adding gains of nearly 1 per cent in yesterday and within striking distance of a one-month high of $1.2748 hit earlier this week.
Euro edged higher today as investors waited to see if the Fed will announce fresh monetary stimulus at the end of the two-day meeting later today to boost the ailing US economy.
The dollar index, a gauge of six major rivals, was also down by over 0.05 per cent while New York crude oil was trading above $84 a barrel in European market on Wednesday.