The rupee slid on Monday on sustained dollar buying by state-run banks that act on behalf of the central bank and month-end purchases of the US currency by companies needing to make loan or import payments. The partially convertible rupee weakened 0.11 percent to close at 43.5475/5525 per dollar, from Friday's 43.4950/5050.
"We again saw periodic intervention by the state-run banks today and that along with the oil-related and month-end demand weighed on the rupee," a trading head at a private bank said.
"Supplies (of dollars) were fairly strong though and we saw 43.4750 dealt in the morning before the central bank stepped in."
The rupee jumped to a six-year peak of 43.1150/1350 on Friday, a day after China revalued its yuan, before being yanked bank by aggressive rupee sales by the Reserve Bank of India (RBI).
Traders said the central bank, which stayed away from the currency market in April-June and for most of July as well, appeared to have decided to step in now that China had gone ahead and revalued the yuan by 2.1 percent.
"It is almost like they were waiting for this (the yuan move) to happen before coming back into the market," a trader at a state-run bank said.
"Probably they want to use this opportunity to send a signal to the market not to speculate too much and build up some reserves at the same time."
The RBI's currency interventions come just ahead of its first quarterly monetary policy review on Tuesday and analysts said the upward pressure on the rupee from China's yuan revaluation had raised uncertainty as to whether the RBI would raise rates.
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