Rupee continues free fall, breaches 90-mark against dollar for the first time

The rupee breached the 90-mark against the US dollar for the first time on Wednesday, slipping 6 paise to 90.02 in early trade as banks continued to buy dollars at higher levels amid persistent FII outflows.

However, forex traders said the decline was tempered by a softer dollar index and a drop in global crude oil prices, which helped cushion the currency from a sharper fall.

At the interbank foreign exchange, the rupee opened at 89.96 against the greenback and slipped to a record intra-day low of 90.15 before recovering some ground to trade at 90.02, down 6 paise from its previous close.

On Tuesday, the rupee settled 43 paise down at an all-time closing low of 89.96 against the US dollar, largely owing to continued short-covering from speculators and sustained importer demand for the American currency.

"The rupee has been weakening with the Government of India and the Reserve Bank of India (RBI) wanting to help exporters and may have kept the dollar well bid in the past few days," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

"Nationalised banks were buying dollars at higher levels consistently yesterday (Tuesday)... There was a deal at 90.0050 after the close of market hours on the trading platform. The stalled India-US trade talks and heavy FPI outflows are causing this fall in rupee despite a weakening dollar index," he said.  Bhansali said the rupee might hit 91 levels in this cycle if the RBI support eases at 90.

RBI's MPC meeting starts on Wednesday, and the interest rate decision will be declared on December 5, ahead of the US Federal Reserve interest rate decision on December 10. "A rate cut by the RBI could invite further selling of the rupee," he added. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.13 per cent lower at 99.22.

Brent crude, the global oil benchmark, was trading 0.03 per cent lower at USD 62.43 per barrel in futures trade.

On the domestic equity market front, Sensex declined 165.35 points to 84,972.92 in early trade, while Nifty was down 77.85 points to 25,954.35. Foreign Institutional Investors sold equities worth ₹3,642.30 crore on Tuesday, according to exchange data.

(With PTI inputs)