The rupee plunged by 9 paise to settle at an all-time low of 83.33 vis-a-vis the US dollar, foreign funds continued to pull out of the stock markets, and oil prices rose amid geopolitical uncertainties in the Middle East.
The US greenback also strengthened on the dollar index against the basket of six major currencies going up 0.20 per cent higher at 106.87. The rupee opened at 83.26 against the dollar on Wednesday and plummeted to an intra-day low of 83.35 against the US currency.
However, after some vacillation, it finally settled 9 paise lower over the previous day’s close to end at its lifetime low of 83.33. The Indian rupee is facing headwinds as higher yields on US bonds is leading to hot money exiting the Indian stock markets and rising crude oil prices in the global market have firmed up the demand for dollars.
According to market analysts, while the RBI has succeeded in keeping the volatility of the rupee in check by releasing US dollars from its reserves, this cannot continue beyond a point as there has been a continuous decline in India’s foreign exchange kitty in recent weeks.
The RBI has been continuously intervening in the forex market during October to prevent the rupee from falling below the low of 83.29 vs the US dollar. India’s foreign exchange reserves fell by $2.36 billion to $583.53 billion during the week ended October 20, according to RBI data released on Friday.
In the preceding week the country’s forex reserves had increased by $1.15 billion, reversing a continuous decline over the previous five weeks. The country’s foreign exchange reserves had fallen by $14.166 billion to a five-month low of $584.74 billion for the week ended October 6.
With the fresh decline, the forex reserves have fallen even further. A decline in the country’s forex kitty leaves the RBI less headroom to intervene in the market to stabilise the rupee which would weaken the Indian currency.