The rupee fell 40 paise to an all-time low of 81.93 against the US dollar in early trade on Wednesday, as the strengthening of the US currency and risk-averse investor sentiment weighed on the local currency.
Furthermore, a downward trend in domestic equities and significant foreign fund outflows dampened investor enthusiasm, according to forex traders. The rupee opened at 81.90 against the US dollar on the interbank foreign exchange, then fell to 81.93, a drop of 40 paise from its previous close.
The rupee consolidated in a narrow range on Tuesday, finishing 14 paise higher at 81.53 per dollar. According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the rupee opened weaker on Wednesday as the dollar resumed its upward momentum, supported by hawkish Fed talk.
According to Iyer, the local unit could track the weakness of its Asian and emerging market peers, and a delay in listing local bonds on a major global index this year could also limit gains.
“The Reserve Bank of India (RBI) may be present to curb volatility,” Iyer noted.
The dollar index, which measures the strength of the US currency against a basket of six currencies, rose 0.40 percent to 114.55.
Meanwhile, investors are anticipating the outcome of the RBI’s monetary policy meeting on Friday. Brent crude futures fell 1.33 percent to USD 85.12 per barrel, the global oil benchmark.
The 30-share BSE Sensex was trading 373.37 points, or 0.65%, lower at 56,734.15, while the broader NSE Nifty was down 108.20 points, or 0.64 percent, at 16,899.20.
According to exchange data, foreign institutional investors were net sellers in the capital market on Tuesday, offloading shares worth Rs. 2,823.96 crore.