The rupee declined 25 paise against the US dollar to close at a new record low of 72.70 on Tuesday. Strength in the dollar overseas along with soaring crude oil prices battered the rupee as the domestic equity markets entered a second day of selloff. The rupee gained some ground against the greenback earlier on Tuesday but reversed those advances to touch a fresh life-time low of 72.75, before settling at 72.70 for the day. The currency pared some of its losses later in the day following a Reserve Bank of India (RBI) intervention, news agency Reuters cited dealers as saying. Still, Tuesday's fall meant an overall depreciation of 14 per cent so far this year.
Here are 10 things to know:
1. The rupee had risen as much as 20 paise against the greenback to touch an intraday high of 72.25 on selling of the dollar by banks and exporters, but reversal of losses in the US dollar overseas dragged the Indian currency lower.
2. Analysts stare at a widening current account deficit - which is the difference between imports and exports - on the back of soaring crude oil prices.
3. "Comments from the finance ministry supported the rupee but the external shocks and twin deficit concerns continued to add pressure," said IFA Global, a forex advisory firm.
4. The government has asked the Reserve Bank of India (RBI) to bolster efforts to support the rupee, Asia's worst-performing currency of the past month, news agency Bloomberg cited people familiar with the matter as saying.
5. The dollar rose against a basket of six major currencies, driven by concerns on the trade war between the US and China, the world's two largest economies.
6. Emerging market currencies remained under pressure with a broad index down near 16-month lows. Going forward, a bullish US central bank, turmoil related to the trade war and geopolitical tensions could support demand for the dollar, IFA Global added.
7. China will ask the World Trade Organization next week for permission to impose sanctions on the United States, for Washington's non-compliance with a ruling in a dispute over US dumping duties that China initiated in 2013, a meeting agenda showed on Tuesday.
8. Surging crude oil prices also fuelled further depreciation in the rupee, say analysts. Crude oil prices extended gains to cross the $78 a barrel mark, as investors anticipated a tightening supply.
9. The domestic markets plunged for a second straight session, with the Sensex and Nifty shedding 2.5 per cent in two days.
10. Fund outflows by institutional investors led to a selloff in the markets. Net sale of equities by foreign portfolio investors and domestic institutional investors (DIIs) stood at Rs 841.68 crore and Rs 289.66 crore on Monday, according to provisional data from the NSE. Foreign investors have sold a net $6.5 billion so far this year with most of the outflows in debt markets.
(With agency inputs)
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