Rupee drops sharply by 20 paise on policy overhang

The rupee dropped sharply by 22 paise, following the status-quo maintained by the RBI over repo rates. The currency was last trading at 54.16 to the dollar as against Wednesday's close of 53.96.

Month end demand for dollars from oil marketing companies also added to the pressure on the rupee. Today's drop was more on account of sentiments given that the RBI did not cut repo rates on Tuesday.

The Indian currency has appreciated sharply over the last couple of months, following a slew of reform measures initiated by the UPA II government.

Sharp increase in dollars through foreign fund flows has also supported the rupee. However, fund flows from FIIs have started dwindling and equity markets have started dropping. This may have an adverse impact on the rupee in the short term.

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