MUMBAI: The rupee, after gaining in the past week, saw its worst single-say fall since February 5, plunging 51 paise or 0.6% to close at 87.21 on Tuesday or from 86.695 in the previous session, spooked by the continuing talks about additional tariffs by the US president Donald Trump and the offshore derivatives market expiry, which led to a surge in dollar demand .
The rupee slipped 0.6% from Monday’s level, its biggest single-day fall since February 5, losing 51 paise, which was also due to month-end dollar demand by importers, a forex trader with a public sector lender said, adding the sustained sellout of equites by foreign funds only added to the continuing pain of the rupee which had been under pressure since last October, losing close to 3.5%. On February 10, the unit sniffed at 88 to a dollar touching 87.95.
The rupee opened weak—despite the stocks opening in the green, at 86.83 and kept losing ground through the day before settling at 87.23. The unit had settled at 86.72 Monday.
Among its Asian peers, the rupee was the worst performer as the day also marked monthly expiry.
“A combination of position unwinding and increased month-end dollar demand led to a decline in the rupee. Sentiment remained negative for the rupee, driven by foreign fund outflows and robust dollar demand. In the short term, traders are focused on the $10 billion rupee-dollar swap set for February 28. From a technical perspective, the rupee faces resistance at 87.45 and support at 86.50,” Dilip Parmar, senior research currency analyst at HDFC Securities, told TNIE.
The rupee saw a sharp decline against the dollar on Tuesday, marking its biggest intraday drop in the past three weeks. Towards end the unit gained marginally purportedly on RBI intervention. Despite this recovery, the rupee remains weak below the 87.20 level, Rahul Kalantri, vice-president, commodities, at Mehta Equities said.
The drop in the rupee came after Trump’s statement on tariffs related to Mexico and Canada. Adding on to this, fresh sell-off in the equity markets put further pressure on the rupee. We expect a rupee to remain volatile this week and may trade in the range of 86.65-87.70 this week, Kalantri added.
Covering of short positions due to the expiry of the non-deliverable forward contracts also weighed on the rupee, another public sector bank trader said, adding they expect the rupee to trade negative on the back of overall weakness in the domestic equity markets and persistent selling by foreign investors.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.04% to 106.64.
"The dollar clawed back some losses after falling to its lowest in two months buoyed by safe-haven flows after the Trump said that tariffs on Mexico and Canada would go ahead as planned," a trader from a private sector bank said.
"You have dollar demand on the back of maturity of NDF positions, importer hedging and weak Asian cues-all factors stacked up against the rupee, providing very little room for appreciation," a forex trader at a private sector bank said.