On Tuesday, the Indian rupee plunged, crossed the psychologically important 90-per-dollar mark briefly in the first time in history, and then settled at a record low of 89.95 (provisional) versus the US dollar. The currency had closed 42 paise below its last finish as the importer pressure and the strong short-covering of the speculators continued.
According to the currency traders, the market has been stressed over some of the sessions and this is because of the outflow of foreign funds in the domestic equities and also the increasing uncertainty of the much anticipated Indo-US trade deal. All these have undermined confidence of investors, and enhanced forex market volatility.
The rupee started at 89.70 and slowly lost momentum in the course of the day at the interbank foreign exchange market. It hit an all-time intraday low of precisely 90.00 to the greenback in a 47-paise drop since Monday. Monday already indicated the local currency had been straining, closing down at 89.53.
The dollar index, which gauges the strength of the US dollar relative to six leading currencies was marginally higher at 99.41 globally and put more strain on the emerging market currencies such as rupee. Brent crude futures on the other hand fell 0.25 percent to USD 63.03 per barrel providing little relief to India which is a large importer of oil.
Market analysts identified major technical levels that the rupee will follow in the future. The levels of support are anticipated in the 88.80-89.00 area whereas the nearest level of resistance is 90.00. This momentum traders may be encouraged by a strong daily close over 90 that may initiate new speculative inflows, thus creating volatility in the short-term, said Banerjee, a forex strategist.
It was also negative sentiment in domestic equity markets. Sensex fell by 503.63 that led to the close of the Sensex at 85,138.27, and Nifty by 143.55 that culminated at 26,032.20.
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