The rupee slipped past 62.50 per dollar on Friday, its weakest since February 6 on the back of broad dollar strength. At its day low, the rupee fell 18 paise against Thursday’s close of 61.33 per dollar.
Here are the reasons for the fall in the rupee:
1) Broad dollar strength: The dollar was firmer against most of its major peers after upbeat US retail sales data. Most Asian currencies also weakened against the dollar. The Japanese yen traded around 119.20 against the dollar, moving away from a two-week high of 117.43 hit on Thursday.
2) Selloff by foreign investors: Foreign institutional investors, who have pumped in over Rs 1 lakh crore into Indian equities this year, sold shares worth Rs 808 crore in cash market yesterday. On Wednesday, FIIs had sold Indian equity derivatives worth Rs 1,915 crore.
Moses Harding, group CEO & chief economist at SREI Infrastructure Finance tweeted, “#nifty and #Rupee will stay nervous feeling the pulse of #FII mood-swing; any sign of loss of appetite (dilution or withdrawal) will be bad!”
3) Concerns about global economy: Oil prices resumed their downward slide on Friday sparking concerns about the extent of weakness in the global economy.
The rupee can now slip to 62.85 per dollar. Traders will be eying if the Reserve Bank intervenes in the currency market to support the rupee via state-owned banks.