On Monday, the Indian rupee hit a new all-time low of 88.19 against the US dollar, and dropped 10 paise after closing 10 paise below. The downward revision is against the background of rising uncertainties about the Indo-US trade agreement and the rising dollar demand by importers.
Forex traders state that the rupee started weakly at the beginning of the session at 88.18 against the greenback and quickly dropped even further, reaching its all-time intra-day low at 88.33. Continuous foreign outflows of funds and fears of an increasing trade deficit in India due to the imposition of additional trade tariffs by the US took a toll on the domestic currency.
The fall of the rupee on Monday is a continuation of the historic violation of the 88-mark on Friday when it closed at 88.09 after reaching the same intra-day low of 88.33. This relentless pressure is a sign that there is still volatility in the currency market.
Domestic markets, however, on the equity front, painted an opposite picture. The BSE Sensex shot up 554.84 points to finish at 80,364.49, and the NSE Nifty shot up 198.20 points to trade at 24,625.05, driven up by steadfast buying in major sectors despite rupee weakness.
In the meantime, the dollar index, used to gauge the strength of the greenback versus a basket of six major currencies, also fell by 0.14 per cent to 97.63, providing the rupee with some cushion at the bottom. However, the Brent crude futures prices advanced by 0.99 per cent and were at USD 68.15 per barrel, which casts doubts on the import bill of India.
To make things worse, the Foreign Institutional Investors (FIIs) did not stop their selling spree and sold equities worth Rs 8,312.66 crore on Friday. On the reserves front, RBI announced a decrease of USD 4.386 billion in forex reserves to bring the total to USD 690.72 billion at the week ending August 22, compared to USD 695.106 billion before.
Comprehensively, the rupee records its lowest point due to the joint impact of global uncertainties, trade tensions, and capital outflows, which hints at additional volatility in the near future.
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