The rupee failed to recover in morning trade on Tuesday despite a weak dollar and was hovering at the previous day’s record low of 83.34 against the US greenback at 11.28 a.m.
Although the dollar index fell to 103.20, its lowest level in two-and-a-half months, the rupee did not gain as expected. Traders attributed this to importers such as oil companies buying more dollars as a hedge to take advantage of the low price.
Other Asian currencies have gained due to the decline in the US dollar.
The rupee had crashed by 7 paise to settle at 83.34 vis-a-vis the US dollar on Monday, amid an increase in crude oil prices and foreign funds flowing out of stock markets.
Brent crude futures, the global oil benchmark, rose 0.66 per cent to USD 81.14 per barrel on Monday while the Sensex declined 139.58 points to settle the 65,655.15 level. The Nifty fell 37.80 points to 19,694.
Foreign institutional investors (FIIs) were net sellers in the capital markets on Friday as they sold shares worth Rs 477.76 crore, according to exchange data.
India’s foreign exchange reserves decreased by USD 462 million to USD 590.321 billion for the week ended November 10, according to the latest RBI data released on Friday. Any decline in forex reserves leaves less headroom for the RBI to intervene and prop up a weakening rupee.
On Friday, the rupee had closed at 83.26 against the dollar. The earlier record low registered by the rupee was 83.33 against the dollar on November 13, this year.
The rupee has been fluctuating within a narrow band as the RBI sells dollars when the rupee goes into a free fall.