The rupee closed the day at Rs. 129.90/130.10 against the greenback from an opening position of Rs. 129.60/70.
"Import demand is still strong although we continue to see exporters converting their holdings and other foreign currency inflows," a currency dealer said.
Dealers said with the trade deficit still wider than expected the best option would be for the Central Bank to raise interest rates further which would contain credit growth that was fuelling import demand.
Earlier this month the Central Bank said that policy measures taken thus far would be sufficient to contain both the trade deficit and private sector credit growth. It kept key policy interest rates unchanged at 7.75 percent and 9.75 percent.