The rupee on Monday tumbled by 30 paise to end at a fresh 2016 low of 68.76 due to deteriorating sentiment in the midst of worsening impact of fund outflows.
Frantic dollar demand from corporates along with an aggressive hedging strategy adopted by importers in the wake of the currency volatility predominately took a toll on the domestic unit despite moves by the central bank to stabilise the currency.
Massive fund outflows in the wake of an impending US Fed rate hike and a bullish dollar overseas have hit the rupee sentiment, a forex dealer commented.
Ongoing redemption pressure on foreign currency non-resident (FCNR) deposits also aided to the rupee’s woes, the dealer said further.
At the Interbank Foreign Exchange (forex) market, the local unit opened modestly higher at 68.42 from last Friday's closing value of 68.46.
However, the initial positive momentum failed to gain ground with the currency retreating sharply to hit an intra-day low of 68.80 before ending at 68.76 -- its lowest closing level so far this year -- showing a steep loss of 30 paise, 0.44 per cent.
The rupee has shed 3.95 per cent of its value since the beginning of 2016.
The rupee had plunged to a record low of 68.8650 in day trade last Thursday before recovering on RBI intervention to settle at 68.74 -- the lowest level in 39 months.
It had closed at a record low of 68.80 on August 28, 2013, impacted by the so-called taper tantrum after the Fed's signal to end its unprecedented bond purchases.
Foreign investors have pulled out close to USD 5 billion from the capital markets in November so far amid concerns over the impact of demonetisation coupled with fears of a rate hike by the US Federal Reserve.
In worldwide trade, the greenback fell back modestly against all its major rivals at the beginning of the week after its longest winning streak in three years.
The dollar has strengthened nearly 6 per cent so far this month after the US presidential election outcome as markets speculated on a buoyant fiscal stimulus to boost the economy that will tackle inflation and an aggressive Fed rate hike cycle.
The US dollar index was quoted higher at 101.51 in the late afternoon.
Meanwhile, the RBI on Monday fixed the reference rate for the dollar at 68.7235 and euro at 73.1768.
In cross-currency trades, the rupee firmed up further against the pound sterling to settle at 85.26 from 85.28 in its previous close. But it fell back against the euro to finish at 72.92 as compared to 72.53 previously. It also drifted down against the Japanese yen to conclude at 61.22 from 60.66 per 100 yens earlier.
The country's foreign exchange reserves fell sharply by USD 1.542 billion to USD 365.499 billion in the week ending November 18.
The outflows on account of selling by foreign investors and hedge funds remained unabated for the fourth straight week with USD 737.49 million of outflows from equities and debt markets.
In the forward market, premium for dollar edged up further due to sustained paying pressure from corporates.
The benchmark six-month premium for April rose to 103-105 paise from 99-103 paise and the far-forward October 2017 contract also firmed up to 251-253 paise from 248-252 paise from 230-233 last weekend.
Image used for representational purposes only. Photograph: Reuters.
