Demand for dollar by oil companies and selling pressure in domestic equities precipitated the fall of rupee against the U.S. dollar on Wednesday. The strengthening of dollar against other major currencies globally also aided the fall.
The rupee closed at 55.46/47 a dollar against 55.41/42.
The rupee opened flat but later depreciated to test this year’s new low of 55.62/63 in spot market intra-day.
“A mix of strong U.S. dollar overseas, high import demand, which is seasonal and participant positioning, which was overly short on U.S. dollar might have been the sharp upside moves in the U.S. dollar,” said Anindya Banerjee, Currency Analyst, Kotak Securities. Once, the rupee broke below the 55.15/20 support level, there was strong demand from importers to cover and also option traders who were looking to rebalance their hedges. “This drove the pair (rupee / dollar) towards 55.62/63,” Mr. Banerjee added.
“We expect a range of 55-55.80 over the near-term on spot,” said Mr. Banerjee.