High crude oil prices, along with outflow of foreign funds and fears over a hike in crucial domestic lending rates pulled the Indian rupee to a new record low of over 73.40 per US dollar on Wednesday.
However, possible intervention by the country’s central bank aided the Indian rupee to recover before closing at 73.34 (73.3450) to the US dollar.
The apex bank is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.
On Wednesday morning, the Indian rupee opened at a record low of 73.25 per US dollar surpassing the previous low of 72.98 per dollar, which it had touched on September 18.
It slipped further to — 73.42 — its lowest-ever mark — against the greenback at the Inter-Bank Foreign Exchange Market.
According to Edelweiss Securities Head for Forex and Rates Sajal Gupta: “Market has not reacted positively to steps taken by the government for stability in rupee as they were perhaps not strong enough to address the key issue of short-term demand.”
“Most of the Asian and emerging currencies are calmer in the past one month. The market is reacting strongly to Brent crude movements, and with current pace 75 can likely be seen if crude touches 88-90 levels.”
Currently, the Brent crude oil price is around $85 per barrel.
Additionally, fears over the Reserve Bank of India (RBI) turning more hawkish in its monetary policy stance due to a rise in inflationary pressure has subdued the prospects of the rupee.
“The rupee has made a new record low today on the back of consistent rise in the crude oil prices,” Rushabh Maru, Research Analyst at Anand Rathi Shares and Stock Brokers, told IANS.
“Sharp volatility in the domestic equities and steep FIIs outflows from equity and debt segments keeping sentiments bearish for the rupee. The dollar index is hovering around multi-months high as the Federal Reserve continues to raise interest rates aggressively.”
Investment-wise, provisional data with exchanges showed that foreign institutional investors sold stocks worth Rs 1,550.04 crore on Wednesday.