The rupee ended unchanged at 61.79 against the dollar on Tuesday on alternate bouts of demand and supply amid surprise steps by the RBI to increase liquidity.
The Reserve Bank of India on Monday reduced the marginal standing facility (MSF) rate, at which it lends emergency funds to banks, by 50 basis points to 9 % % to improve liquidity conditions in the banking system.
Dollar demand from importers matched supply from exporters, resulting in the rupee ending stable.
At the interbank foreign exchange market, the local currency resumed higher at 61.68 a dollar from the previous close of 61.79 and moved in a range of 61.60 to 61.91 before settling at the overnight closing level.
The 30-share benchmark Sensex pared initial gains and closed 88.51 points or 0.44 % higher. Overseas funds bought a net Rs 494.13 crore of shares yesterday, according to provisional data with the stock exchanges.
The dollar index was up by 0.07 % against a basket of six major global currencies.
"Despite yesterday's announcement regarding cut in the MSF, rupee was not seen gaining today," said Abhishek Goenka, CEO of India Forex Advisors. "The overall international markets were also seen trading flat."
Forward dollar premiums reacted sharply downward on fresh receipts by exporters.
The benchmark six-month forward dollar premium payable in March dipped to 237-242 paise from overnight closing levels of 248-253 paise and far-forward contracts maturing in September dropped to 443-1/2-448-1/2 paise from 462-465 paise.
The RBI fixed the reference rate for the dollar at 61.6885 and for the euro at 83.6875.
The rupee eased further to 99.43 against the pound from Monday's close of 99.36 and also closed a tad lower at 83.90 per euro from 83.89.
It recovered slightly against the Japanese yen to 63.65 per 100 yen from 63.77.