On Monday, the rupee further declined 43 paise to an all-time low of 81.52 against the US dollar in early trade as the strengthening of the American currency and risk-averse sentiment among investors weighed on the local currency, the PTI reported.
According to news agency, escalation of geopolitical risks because of conflict in Ukraine, a negative trend in domestic equities, and significant foreign fund outflows sapped the investor appetite, forex traders said.
At the interbank foreign exchange, the rupee opened at 81.47 against the greenback, then fell to 81.52, registering a fall of 43 paise over its previous closing.
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On Friday, the rupee slumped 30 paise to close at a fresh lifetime low of 81.09 against the US dollar.
The Indian rupee sank to a historic low will make import of crude oil and other commodities expensive further fuelling inflation which for the past several months has remained above the Reserve Bank Of India’s upper tolerance band of 6 per cent.
The pressure on the domestic currency, which is mainly due to repeated hikes in interest rate by the US Fed, is likely to continue with rise in trade deficit and gradual withdrawal of funds by institutional investors.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the Indian rupee is likely to remain weaker as investors expect that the US Fed will continue to hike interest rates aggressively to cool inflation.
“Focus now shifts to RBI’s meeting this week, with its decision due on Friday. We expect RBI to hike rates by 50 bps to cool stubbornly high inflation and prevent the currency from weakening further,” Iyer said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced 0.67 per cent to 113.94.
Global oil benchmark Brent crude futures fell 0.58 per cent to $85.65 per barrel.
On the domestic equity market front, the 30-share BSE Sensex plunged 885 points to 57,213 in the initial trade. On the other hand, the broader NSE Nifty declined 290 points to 17,036.
Foreign institutional investors were net sellers in the capital market on Friday as they offloaded shares worth Rs 2,899.68 crore, as per exchange data.
Meanwhile, the country’s forex reserves declined $5.219 billion to $545.652 billion for the week ended September 16.