Rupee Hits Historic Low Versus Dollar: What’s The Real Cause?

New Delhi: A sharp fall in the rupee was seen in Tuesday morning trade. In early deals, the Indian currency fell by 32 paise to Rs 89.85 per dollar, which is its lowest level till date. Traders say that the international strength of the dollar and continuous selling by FPIs are weighing heavily on the rupee.

Did the rupee make a weak start in the interbank market too?

The rupee opened at 89.70 at the start of trading, but within minutes it slipped further to 89.85. It was 32 paise below the previous closing price. On Monday too, the rupee showed weakness and closed at 89.53 after falling to 89.79 during the day. Two consecutive days of decline has increased the concern of the market.

Is the strength of the dollar index also a major reason for the fall of the rupee?

The dollar index, which measures the dollar's position against six major currencies, stood at 99.41 on Tuesday. This is an indication that the dollar has a strong hold globally. Due to this, the demand for buying dollars by companies, importers and foreign investors increased, due to which the Indian currency came under further pressure.

Did the decline in the domestic stock market also affect the rupee?

The stock market also had a weak start. Sensex opened 223 points down at 85,418 and Nifty opened 59 points down at 26,116. Investor confidence was weakened due to weakness in both the indexes. On the other hand, in the international market, Brent crude remained at $ 63.15 per barrel, which shows a slight decline. Fluctuations in energy prices also determine the direction of the currency market.

Is selling by foreign investors taking the rupee further down?

According to stock market data, foreign institutional investors sold shares worth Rs 1,171 crore on Monday. Demand for dollars has increased due to FIIs being in continuous selling mode. Experts say that this trend may continue until global signals stabilize.

Do experts believe that RBI can stop the rupee from falling below the 90 level?

According to currency market experts, the reason for the fall of rupee is aggressive selling by FPIs and NDF expiry covering. According to Reuters report, it is possible that the Reserve Bank may have intervened in the market by selling dollars to avoid breaking the psychological level of 90. However, no formal comment has come from RBI.