The rupee slid 5 paise and touched Rs 85.53 against the US dollar in the early trade on December 30. The reasons attributed for the down move is an increased demand from importers, foreign investment outflows and a less activity in the Indian equity market affected the investor sentiments.
At the interbank foreign exchange, the rupee opened weaker and declined to Rs 85.53 against the US dollar, marking a drop of 5 paise from its previous close.
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Volatility in rupee
The rupee experienced significant volatility on Friday and opened weaker on Monday, driven by increased demand for dollars. This was largely due to the expiry of December currency futures and the maturing of positions in outstanding forwards, according to forex traders.
On Friday, the rupee recorded its steepest decline in nearly two years, reaching a lifetime intraday low of Rs 85.80. However, a suspected intervention by the central bank helped limit further losses, and the rupee closed 21 paise lower at a record low of Rs 85.48 against the US dollar.
Meanwhile, the dollar index, which tracks the US dollar’s performance against a basket of six major currencies, was at 108.00.
FII outflows and Foreign Reserves drop
Foreign Institutional Investors (FIIs) net sold Rs 1,323.29 crore in the capital markets on Friday, according to exchange data.
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Meanwhile, the Reserve Bank of India reported that the country’s foreign exchange reserves fell by $8.478 billion to $644.391 billion for the week ending December 20. In the previous week, reserves had dropped by $1.988 billion to a six-month low of $652.869 billion.
The decline in reserves has continued over the past few weeks, mainly due to revaluation and forex market interventions by the RBI to help stabilize the rupee. The reserves had reached a record high of $704.885 billion at the end of September.
(With PTI Inputs)
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