Rupee falls to all-time low of 79.88 against US dollar

The rupee ended at a record closing low against the greenback for the fourth consecutive session today as the dollar gained further ground globally on the expectation of faster policy tightening by the US Federal Reserve, dealers said. The rupee was also weighed by continuous purchases of the US currency by oil marketing companies and foreign institutional investors who pulled out of Indian assets, dealers said.

Today, the rupee closed 0.3% lower at a record closing low of 79.8750 a dollar. Earlier today, it fell to an all-time low of 79.9150 a dollar. The Indian currency began the day 9 paise lower at 79.7150 a dollar because the greenback rose against a basket of major currencies due to higher-than-expected US June CPI data, dealers said.

Data from the US Labor Department on Wednesday showed that inflation in the US jumped 9.1% in June, higher than the anticipated 8.8%, marking the largest increase in nearly 41 years. This led to fears that the US Federal Reserve may go for a supersized rate hike of 100 basis points in its upcoming July meeting to tame mounting inflation.

The dollar index, which measures strength in the US currency against a basket of six major currencies, rose to 108.65 today, its highest level since October 2002. At 1645 IST, the dollar index was at 108.63 compared with 107.96 on Wednesday. It was at 108.07 on Tuesday. Three hours into trade, the rupee was dragged to 79.9025 a dollar as foreign banks persistently purchased dollars on behalf of foreign institutional investors, dealers said.

Moreover, banks continuously purchased dollars on behalf of oil marketing companies, which also weighed on the rupee. Prices of crude oil fell more than 2% today as increasing fears of a global economic slowdown weighed on the outlook on demand for the fuel.

At 1645 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $97.49 a bbl as against the previous close of $99.57 a bbl. "Buying (of dollars) by oil importers was seen as soon as the market opened," a dealer with a private bank said. Dealers said the central banks tried protecting the rupee from falling beyond 79.90 a dollar for a very long time, but as the dollar purchases continued, the domestic unit fell to an all-time low of 79.9150 a dollar.

As soon as the rupee fell to 79.90-79.91 a dollar levels, the central bank stepped up its dollar sales, as a result of which the rupee pared almost 10 paise of losses, dealers said. Dealers said the central bank wanted to prevent the rupee from falling beyond the psychologically-crucial support level of 80.00 a dollar.

"There was aggressive selling by the RBI around the 79.90 (a dollar) level," a dealer with a state-owned bank said. "I think to save the rupee from touching the big number (80 a dollar), we'll see a change of strategy in their intervention. But I don't think the 80 (a dollar) level can be avoided." However, after oil importers continued their dollar purchases, the rupee ended at a record closing low of 79.8750 a dollar.