The rupee lost ground for the second straight session on Wednesday, pulling away from recent five-week peaks, as commercial demand for the US currency perked up amid a widening trade deficit, dealers said. The local unit ended at 43.63/64 per dollar, down from the previous close of 43.5850/5950 and off a five-week closing high of 43.55/56 on Monday. "There was dollar demand from state-run and foreign banks which weighed on the rupee," said a chief dealer at a private sector bank.
"The central bank will be comfortable with the move as this is what they have been wanting - a weaker rupee." Traders said a few banks had gone long on the dollar on expectations that commercial demand seen on Wednesday would spillover into the next session.
The rupee started on a weaker note after the dollar hit a one-week high against the euro on rising foreign investments in the world's largest economy.
But the US unit lost some ground in European trade ahead of data which is expected to show the US current account deficit widened to a record level in the fourth quarter.
The dollar's recent weakness should boost sentiment for the rupee but India's central bank has been intervening to curb gains in an attempt to keep exports cheap.
It has been intervening through state-run banks, who have been absorbing robust foreign equity flows into Asia's fourth-largest economy, dealers say.
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