Premium

Rupee falls further, just shy of 86/dollar mark

The rupee's fall below the psychologically important 86 level is likely "sooner rather than later," a trader at a foreign bank said.

Meanwhile, foreign investors have pulled out over $3 billion from Indian stocks and bonds so far in January.(Representational Image: Pexel)

The rupee declined to 85.97 against the US dollar on Friday as American currency strengthened and foreign funds pulled out money from the equity market. Surging crude oil prices overseas and negative sentiment in domestic equity markets also weighed down the Indian currency.

The Indian currency opened at 85.88 and hit an intra-day low of 85.98 against the dollar. The Reserve Bank reportedly intervened in the market through banks by selling dollars to arrest the slide, forex market sources said. The rupee is set to cross the 86 level in the coming weeks, they said.

There were reports that the rupee crossed the 86 level in the non-deliverable forward (NDF) market.A major reason for the weakening of the rupee is selling by foreign investors in the equity market. They had sold stocks worth `21,357 crore in January so far. India’s forex reserves dropped by $5.693 billion to $634.585 billion in the week ended January 3, the Reserve Bank of India said on Friday. The dollar strengthened on increased demand amid the anticipation of restrictive trade measures by the new US administration after Donald Trump takes over as president on January 20.

Story continues below this ad

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.01 per cent higher at 109.01. The 10-year US bond yields also rose to its April 2024 level at 4.69 per cent.

Brent crude, the global oil benchmark, surged 1.96 per cent to USD 78.43 per barrel in futures trade. Forex dealers expect that the pressure on currency will continue in the near-term. “Weak tone in the domestic markets, a strong greenback and persistent FII outflows may continue to put downside pressure on the rupee. Additionally, the rising crude prices, as well as surge in the US treasury yields may further weigh on the domestic unit,” they said.

However, any RBI intervention may support the rupee at lower levels. Traders may take cues from the non-farm payrolls report and consumer sentiment data from the US.

On the other hand, in the domestic equity market, the 30-share BSE Sensex declined 241.30 points, or 0.31 per cent, to settle at 77,378.91 points, while the Nifty dropped 95.00 points, or 0.40 per cent, to 23,431.50 points. The indices have been on the downward track for the past three sessions.