Rupee declines to record low of 79.33 against US dollar

MUMBAI: The rupee fell by 38 paise to close at its lifetime low of 79.33 against the US currency on Tuesday due to a stronger greenback overseas and unrelenting foreign fund outflows.

Widening trade deficit, weakness in global currencies against the dollar and expectations of aggressive rate hikes by the US Federal Reserve in coming months also weighed on the local unit.

At the interbank forex market, the local unit opened at 79.04 against the greenback and witnessed an intra-day high of 79.02 and a low of 79.38.

It finally settled at 79.33, down 38 paise over its previous close. On Monday, the rupee had closed at 78.95 against the US dollar.

According to Dilip Parmar, Research Analyst, HDFC Securities, the rupee marked another record low as the worsened trade deficit, which widened last month amid higher commodity prices, and capital outflows weighed on the unit.

''India has witnessed record outflows of around USD 31 billion so far this year. The gap between exports and imports rose to USD 25.6 billion in June from USD 24.3 billion in May, as per the preliminary data.

''The risk of slowing exports and higher imports could continue in the near-term as a slowdown in global growth and tighter monetary policy while imports could hold amid lower commodity prices,'' Parmar said.

The rupee has slumped to a new record low on the back of a rise in the dollar index towards a new peak, said Sugandha Sachdeva, Vice President - Commodity and Currency Research, Religare Broking Ltd.

Besides, heavy portfolio outflows, soaring crude oil prices, and a rising interest rate regime of the major central banks have been the key catalysts behind this recent bout of weakness in the rupee-dollar exchange rate.

Sachdeva further said that moving ahead, Indian rupee could head lower towards the 80-81 zone against the dollar, though the RBI is expected to proactively intervene in the markets to curb the pace of decline in the domestic currency.

Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas, said that the rupee hit a fresh record low against the US Dollar due to stronger dollar and weaker-than-expected domestic data.

India's merchandise exports in June rose by 16.78 per cent year-on-year to USD 37.94 billion while the trade deficit ballooned to a record USD 25.63 billion on account of a steep increase in gold and crude oil imports, according to the government's preliminary data released on Monday.

''Rupee is expected to trade on a negative note on a firm tone in the US Dollar, elevated oil prices, and weak global market sentiments,'' Choudhary said.

Dollar may strengthen on expectations of aggressive rate hikes by the Federal Reserve, Choudhary said, adding that the hike in import duty on gold may support rupee to some extent as it may dent import demand for gold. Rupee may trade in the range of 78.50-80 in the next couple of sessions.

The dollar index, which measures the greenback's strength against a basket of six currencies, was up 0.89 per cent at 106.07.

Meanwhile, the euro declined by 1.2 per cent to its two-decade low against the dollar while the Japanese yen was trading near 24-year low levels.

Brent crude futures, the global oil benchmark, fell 1.10 per cent to USD 112.25 per barrel.

On the domestic equity market front, the BSE Sensex ended 100.42 points or 0.19 per cent lower at 53,134.35, while the broader NSE Nifty declined 24.50 points or 0.15 per cent to 15,810.85.

Foreign institutional investors turned net investors for the first time this month as the bought shares worth Rs 1,295.84 crore on net basis on Tuesday, provisional exchange data showed.