The rupee slipped further to yet another record low, prompted by sustained dollar demand by oil importers, and possibly defence-related purchases.
A possible US sanction on India, if it goes ahead with buying Russian air defence system, also weighed on the sentiments, currency dealers said.
The partially convertible currency fell to its intraday low of 70.86 a dollar, but closed at 70.74 a dollar, as the central bank sold dollars in the market to cool the exchange rate off.
The dollar index, which measures the greenback’s strength against major global currencies, was trading at 94.583, down 0.02 per cent from its previous close.
One major reason for the rupee’s loss, however, is continued rise of crude oil prices. Crude prices rose as supply shrank after Iran sanctions. Brent crude touched $77.64 a barrel on Thursday.
“Oil prices are not coming down, and it will need a very strong good news
on the oil front to get a handle on the exchange rate now,” said a senior trader with a foreign bank. Even as portfolio flows turned negative year to date, in August, the flows have been positive, but only marginally.
The recent loss of rupee, however, is a good news
for the export sector, as the exchange rate is acting as a kind of subsidy for the exporters. Being the month-end, the exchange traded segment also saw some open interest maturing, which put pressure on the rupee.
The Reserve Bank of India (RBI) though is not intervening as much as the market would have wanted it. The reserves have fallen about $24 billion from its peak in April to just about $400 billion now.