Mumbai: The rupee plunged 39 paise to close at an all-time low of 87.46 (provisional) against the US dollar on Wednesday, as global trade war concerns fuelled risk aversion among investors.
Forex traders said the rupee is trading with a negative bias over global trade war as market participants mulled the impact of tariffs being imposed by the United States and China.
Moreover, rate cut concerns by the Reserve Bank of India and broad strength of the American currency in the overseas market dented investor sentiments further.
At the interbank foreign exchange, the rupee opened on a weak note at 87.13 and touched an intraday low of 87.49 against the American currency during the session.
The local unit finally settled at a record closing low of 87.46 (provisional), lower by 39 paise over its previous close.
On Tuesday, the rupee recovered 4 paise from its all-time low level to close at 87.07 against US dollar.
Trump is pressing ahead with a 10 per cent tariff on US companies importing things from China. On Tuesday, China retaliated by announcing its own tariffs on some US products and an antitrust investigation into Google.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.35 per cent lower at 107.58.
Brent crude, the global oil benchmark, fell 0.51 per cent to USD 75.81 per barrel in futures trade.
Investors may remain cautious ahead of the Reserve Bank of India’s monetary policy meeting this week, traders said.
There are expectations of a 25 basis-points rate cut in benchmark policy rates, which will be the first in five years, as inflation remains within the central bank’s comfort zone.
The Reserve Bank had last reduced the repo rate by 40 basis points to 4 per cent in May 2020 to help the economy tide over the crisis following the outbreak of the Covid pandemic and subsequent lockdown.
The Monetary Policy Committee (MPC) of the Reserve bank of India (RBI) began its three-day meeting on Wednesday. The MPC will announce its policy decisions on February 7.
Trump on Monday held off on his tariff threats against Mexico and Canada for 30 days after they pledged to boost border enforcement.
In the domestic equity market, the 30-share BSE Sensex settled 312.53 points, or 0.40 per cent, lower at 78,271.28, while the Nifty fell 42.95 points, or 0.18 per cent, to close at 23,696.30.
Foreign institutional investors (FIIs) purchased equities worth Rs 809.23 crore in the capital markets on a net basis on Tuesday, according to exchange data.
On the domestic macroeconomic front, India’s services sector activity expanded at the slowest pace in over two years in January amid softer increases in sales and output, a monthly survey said on Wednesday.
The seasonally adjusted HSBC India Services PMI Business Activity Index fell from 59.3 in December to 56.5 in January — its lowest level since November.
PTI
