The rupee continued its downward trend for the third consecutive session to close 6 paise lower at 83.23 (provisional) against the U.S. dollar on Thursday, dragged down by massive selling in equity markets and strengthening American currency overseas.
Withdrawal of foreign funds and elevated crude oil prices touching $90 a barrel also weighed on the domestic currency, forex traders said.
At the interbank foreign exchange market, the local unit opened weak at 83.19 and traded between the peak of 83.18 and the lowest level of 83.24 against the greenback. It finally settled at 83.23 (provisional) against the dollar, registering a loss of 6 paise from its previous close.
This is the third straight fall for the Indian currency. It dropped 4 paise on Monday, followed by a dip of 1 paisa on Wednesday when it settled at 83.17.
Forex markets were closed on Tuesday on account of Dussehra.
Analysts attributed the strengthening dollar to a record rise in the U.S. Treasury yields after positive data on home sales in the U.S. on Wednesday.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said a surge in global crude oil prices put pressure on the rupee, but reports of selling of dollars by the RBI cushioned the downside.
“The U.S. dollar gained on safe-haven demand and upbeat economic data from the U.S. We expect the rupee to trade with a slight negative bias on risk aversion in global markets after risk sentiments deteriorated on fears over an escalation of geopolitical tensions in the Middle East,” Mr. Choudhary said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.18% higher at 106.72 on Thursday.
Global oil price benchmark Brent crude declined 0.69% to $89.51 per barrel.
On the domestic equity market front, Sensex plunged 900.91 points or 1.41% to settle at 63,148.15. The Nifty tumbled 264.90 points or 1.39% to 18,857.25.
Foreign Institutional Investors sold equities worth ₹4,236.60 crore on Wednesday, according to exchange data.
Mr. Choudhary said the USD-INR spot price is expected to trade in a range of ₹82.90 to ₹83.60 while traders may take cues from the U.S. macroeconomic data, including quarterly GDP numbers, weekly unemployment claims and durable goods orders.