The rupee weakened to a one-year low of 41.79 per dollar in early trade as oil companies continued their strong dollar demand. A lack of dollar inflows into the stock markets also worked against the rupee today.

But the domestic currency moved off these lows, as some banks booked profits and exporters sold at weaker levels.

It is the combined impact of higher crude prices and falling FII flows. FII flows fell since February but sentiment protected the rupee. The medium-term view of the rupee is still strong.

ICICI Bank’s MD and CEO KV Kamath said dollar flows into the stock markets would be one of the main triggers for the currency in the short term.

“The whole issue of where the rupee moves will depend on our own strength, in terms of how the economy is doing and export-import balances and inflows. Flows are a little slack contributing to weakening of rupee,” said KV Kamath.