Rupee plunges to 19-month low; strong dollar demand, crude prices weigh on currency

Strong month-end dollar demand, along with a rise in crude oil prices, continued to hamper the Indian rupee which plunged by almost 25 paise to a 19-month low of 68.50 against the US dollar in early trade on Wednesday. The rupee fell to a level that was last seen on November 30, 2016. According to currency analysts, a sustained outflow of foreign funds also added pressure on the rupee.

“Usual month-end dollar purchases including oil related will keep the pressure on the rupee, as it approaches all-time lows (68.85). But it will be interesting to see how the RBI remains active in defending an escalated fall in the local currency (like seen its aggressiveness in previous months),” Hiren Sharma, Founder and Managing Partner at Portia Advisory Services LLP, said in a note. “Asian markets are down reflecting the risk-off mood (as seen in Japanese Yen moving sub-110 level again). In all, markets are perhaps just waiting for some fresh trigger,” he added.

According to Hiren Sharma, RBI intervention is suspected at around 68.49/50 level. Yesterday, the rupee closed almost 19 paise lower at 68.25 against the greenback. Provisional data from the stock exchanges showed that foreign institutional investors sold stocks worth Rs 538.40 crore on Tuesday, while domestic institutional investors invested in scrips worth Rs 238.05 crore.

Meanwhile, the domestic equity markets, which opened on a flat-to-positive note on Wednesday, traded in the green as strong buying in index heavyweights TCS, Infosys, HUL and HDFC twins kept market sentiment upbeat. The BSE Sensex traded higher by 81.01 points at 35,571.05 points, while the NSE Nifty 50 traded flat at 10,774.05 points.