The rupee on Friday plunged to lifetime low of 62.03 before recovering to close at a record low of 61.65 against the dollar as local stocks crashed amid fears the RBI's curbs on forex outflows would lead to a return of capital controls.

Dealers also said better-than-expected US economic data led to increasing concern that the Federal Reserve may start easing its stimulus programme as early as next month, which may prompt FIIs to pull out from the local markets. Jobless claims for the week ending August 10 dropped to the lowest since 2007, helping dollar rise against most currencies.

The rupee opened higher at 61.35 a dollar from the previous close of 61.43 and climbed to a high of 61.32 at the Interbank Foreign Exchange Market. As domestic stocks declined, the rupee fell to an all-time low of 62.03. The currency recovered some ground and closed at 61.65, a fall of 22 paise or 0.36%.

To restrict the outflow of foreign currency, the RBI had on August 14 announced stern measures, including curbs on Indian firms investing abroad and on outward remittances by resident Indians. Seeking to calm rattled investors, the government and the RBI today said there was no reverting to a capital control regime.

"It's difficult to understand whether RBI intervened today," said Ashutosh Raina, head of forex trading at HDFC Bank. "More than the fear of capital controls hitting the rupee, it was the spillover effect of Indian stocks nosediving that pulled down the rupee so much."

Sustained dollar demand from importers, mainly oil refiners, and some banks amid a firm dollar overseas also weighed on the rupee, a forex dealer said.

"Panic in stock market cast a shadow on rupee. It recovered as exporters sold dollars at 61.90-62 levels," said Harihar Krishnamoorthy, Treasurer at FirstRand Bank.

The benchmark S&P BSE sensex tanked by 769 points. Foreign institutional investors withdrew a net Rs 563.23 crore today, according to provisional data with the stock exchanges.

"Concerns over early withdrawal of QE by the US Federal Reserve had a cascading effect on equities and also on rupee today. Due to holiday, dollar demand from oil importers and for defence related payment was also high," said Srinivasa Raghavan, executive vice-president (Treasury), Dhanlaxmi Bank.

The dollar index was quoting higher by 0.10% against a basket of six major global currencies.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Expect spot Rupee to depreciate further as all the measures taken by the regulators to support rupee has failed miserably. The trading range for the same is expected to be within 61.20 to 62.20."

However, Reena Rohit, chief manager, non-agri commodities and currencies, Angel Commodities Broking, said: "Measures announced by the RBI are likely to have an impact from the long-term perspective and in the immediate term the impact is expected to be only sentimental."

"But what cannot be ignored is the fact that it is only because of the announcement of these measures by the central banker that the depreciation in the Rupee has been curbed to an extent, with further major losses being prevented."

Going ahead, today's US consumer sentiment data will be very significant for the US dollar and thereby for other major currencies as well, said Abhishek Goenka, Founder and CEO, India Forex Advisors.

Meanwhile, forward dollar premiums rose on fresh payment pressure from banks and corporates.

The benchmark six-month forward dollar premium payable in January firmed up to 261-1/2-264-1/2 paise from Wednesday's close of 256-1/2-259 paise. Far-forward contracts maturing in July improved further to 504-508 paise from 491-1/2-494-1/2 paise.

RBI fixed the reference rate for the dollar at 61.8195 and for the euro at 82.4510.

The rupee tumbled further against the pound sterling to 96.41 from last close of 95.19 and also dropped against the euro to 82.26 from 81.38. It too slumped against the Japanese yen to 63.24 per 100 yen from 62.52.

Keywords:rupee , dollar , local stocks ,RBI, forex outflows,Dealers ,US economic data, programme , local markets,currencies,Interbank Foreign Exchange ,Market,HDFC Bank, importers, stock market, BSE sensex, Foreign institutional investors, Federal Reserve,CEO,business news