The rupee weakened by 12 paise to close at a record low of 92.40 (provisional) against the US dollar on Tuesday, weighed down by rising crude oil prices and continued foreign fund outflows amid tensions in West Asia.
Forex traders said while a positive trend in domestic equity markets offered some support at lower levels, investor sentiment remained cautious ahead of the upcoming interest rate decision by the US Federal Reserve.
In the interbank foreign exchange market, the domestic currency opened at 92.35 and slipped to an intraday low of 92.47 against the greenback. It eventually settled at a fresh all-time low of 92.40 (provisional), down 12 paise from its previous close.
Also read: Sensex, Nifty extend gains, climb 1 pc
On Monday, the rupee had managed a marginal gain of 2 paise but still ended near record lows at 92.28 per dollar. The currency, currently the worst-performing in Asia, had earlier touched an intraday low of 92.47 for the first time on March 13, before closing that session at 92.30 against the US dollar.
According to Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, the rupee’s decline was primarily driven by a spike in crude oil prices and persistent selling by foreign institutional investors (FIIs). However, a rebound in domestic equities and some softness in the US dollar helped limit sharper losses.
He added that any progress toward reopening the Strait of Hormuz, along with possible intervention by the Reserve Bank of India, could provide support to the rupee at lower levels.
“Market participants will closely track monetary policy decisions from major central banks, including the FOMC, ECB, Bank of Japan and Bank of England this week. The USD-INR spot rate is likely to trade in the range of Rs 92.10 to Rs 92.75,” Choudhary said.
Meanwhile, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was marginally up by 0.05 per cent at 99.52.
Global oil benchmark Brent crude rose 2.65 per cent to USD 102.86 per barrel in futures trade. In the domestic equity market, the BSE Sensex advanced 567.99 points, or 0.75 per cent, to close at 76,070.84, while the NSE Nifty gained 172.35 points, or 0.74 per cent, to settle at 23,581.15.
Government data released on Monday showed that India’s trade deficit narrowed to USD 27.1 billion in February compared to the previous month.
Merchandise exports dipped slightly by 0.81 per cent to USD 36.61 billion, while imports surged 24.11 per cent to USD 63.71 billion in February, up from USD 51.33 billion in the same period last year.
Separate data indicated that wholesale price inflation rose to an 11-month high of 2.13 per cent in February, driven by higher prices of food and non-food items, even as vegetable prices eased on a month-on-month basis.
According to exchange data, foreign institutional investors (FIIs) remained net sellers, offloading equities worth Rs 9,365.52 crore on Monday.
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