MUMBAI: The rupee, under pressure for almost two months now, has plumbed new lows breaching the 84.50 mark on Thursday as foreign funds continued to dump domestic equities on one hand and the dollar kept pace with its northward-ho.
The rupee closed the trade at 84.501, on a day when the equity market was whacked after Adani group stocks fell nine pins after a US court criminally indicted chairman Gautam Adani and six other key officials for alleged bribery and other legal breaches in raising funds and securing solar power project contracts.
The rupee had closed at 84.4137 close on the previous trade on Tuesday.
The rupee was dragged by selling in equities by foreign portfolio investors and a strong dollar index, traders said.
The rupee has been under pressure since last month on higher dollar demand and FPI selling along with higher interest rates in the US on the treasury notes are also prompting FPIs to move their money back home in search of better returns, which is also putting pressure on the local currency.
“A strong dollar continues to create a depreciating bias for currencies globally and is likely to sustain FPI outflows from domestic markets in the near term. However, interventions by the RBI, supported by the country’s healthy foreign exchange reserves, should help keep rupee volatility in check,” said Rajani Sinha, chief economist at Careedge Ratings.
She expects the rupee to be rangebound and trade around 84.5 against the dollar by the end of December.
However, she pointed out that RBI interventions have kept the rupee in check, with a fall of only 0.7 per cent during the past fortnight, significantly less than other Asian currencies, such as the yuan (3.2 per cent), Indonesian rupee (4.3 per cent), Korean currency (5.5 per cent), Thai baht (7.1per cent).
FPIs have sold equities worth Rs 94,017 crore in October and Rs 27,859 crore so far in November, according to NSDL data—the highest monthly outgo ever. Similarly, in the debt segment, they sold Rs 4,406 crore in October and Rs 1,095 crore so far in November.
A strong dollar index is also hitting the rupee. The dollar index tracks the performance of the greenback against a basket of 10 leading global currencies and is trading at 106.701 today.
A key factor is that macro data indicate the economy is slowing while inflation is higher than the RBI mandate. Foreign fund outflows from equity and debt are also weighing on the rupee,” said HDFC Securities in a note.