Overnight gains in the American currency coupled with negative domestic equities led to a depreciation in the rupee on Tuesday.
The domestic unit fell 12 paise to revisit its previous all-time low of 88.80 (provisional) against the US dollar, with forex traders saying persistent foreign fund outflows amid dampened global trade situation may further dent investor sentiment.
However, a decline in crude oil prices and reports of the Reserve Bank of India’s (RBI) intervention supported the local unit and restricted the slide.
At the interbank foreign exchange, the rupee opened at 88.73 against the greenback and fell to an intraday low of 88.81 and a high of 88.73. It finally closed the day at 88.80 against the greenback, registering a decline of 12 paise over its previous close of 88.68.
On September 30, the rupee had fallen to an all-time low of 88.80 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.10 per cent higher at 99.36.
Brent crude, the global oil benchmark, was trading lower by 2.15 per cent at USD 61.99 per barrel in futures trade.
Also Read: Rupee hits record low of 88.82 against US dollar
Experts also attribute the uncertainty surrounding India-US trade relations for tipping investor confidence after five rounds of negotiations between the Indian and US officials failed to finalise the Bilateral Trade Agreement (BTA) that the two countries had hoped to sign.
While a team of senior officials from India is slated to visit the US this week for trade talks, negotiations on the proposed BTA seem to be back on track, a top official said on Monday.
In February this year, leaders of the two countries directed officials to negotiate a proposed BTA, the first tranche of which they had hoped would conclude by fall this year.
“A weak tone in global crude oil prices and FII inflows may favour the rupee. The US government shutdown and rising odds of a rate cut by the US Federal Reserve may further weigh on the US Dollar. USD/INR spot price is expected to trade in a range of 88.50 to 89,” said Anuj Choudhary, Research Analyst, Currency and Commodities, Mirae Asset ShareKhan.
On the domestic macroeconomic data front, India’s CPI inflation cooled off to an 8-year low at 1.54 per cent in September against 2.07 per cent in August. It fell below the RBI inflation target of 2 per cent.
WPI inflation too cooled off to 0.13 per cent in September compared to 0.52 per cent in August.
On the domestic equity market front, Sensex dropped 297.07 points to close at 82,029.98, while the Nifty declined 81.85 points to 25,145.50.
Foreign Institutional Investors sold equities worth ₹240.10 crore on Monday, according to exchange data.
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