Rupee plunges 45 paise to hit record low of 87.95 against US dollar in early trade

Mumbai: The rupee depreciated 45 paise to hit a record low of 87.95 against the US dollar in early trade on Monday weighed down by the strength of the American currency in the overseas market and a negative trend in domestic equities.

Forex traders said the dollar index was quoted at 108 gained after President Donald Trump said he was said to impose new 25 per cent tariffs on all steel and aluminium imports.

The move has added jitters over the global trade war with China's reciprocal duties coming into effect, they said.

At the interbank foreign exchange, the rupee opened at 87.94 and slipped further to all-time low of 87.95 against the greenback in initial deals, a fall of 45 paise from its previous close.

On Friday, the rupee recovered 9 paise from all-time low level to close at 87.50 against the US dollar.

Rupee was expected to open weaker after RBI cut rates on Friday by 25 bps and was expected to cut another 25 bps in April to promote growth as inflation seemed to be showing a downward trend as per the Reserve Bank, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

The target of 88 is likely to be achieved in February itself as quick upside with RBI allowing the weakness to creep in has taken the pair to its all time highest level.

"The rupee is expected to be within a range of 87.70/88.10. Importers are expected to buy the dips, while exporters need to wait and watch the movement," Bhansali added.

Reserve Bank Governor Sanjay Malhotra on Saturday said that the market forces decide the value of rupee with respect to the US dollar and the central bank is not worried about day-to-day movement of the currency value.

Addressing the media after the meeting of Finance Minister Nirmala Sitharaman with the Reserve Bank board, Malhotra said that the central bank focuses on the value of the rupee in the medium to long term.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.22 per cent higher at 108.28.

Brent crude, the global oil benchmark, rose 0.63 per cent to $75.13 per barrel in futures trade.

Forex traders said the Indian rupee is trading with a negative bias as foreign banks went on a dollar-buying spree and importers scrambled to secure dollars, as they feared further depreciation amidst global uncertainty.

In the domestic equity market, the 30-share BSE Sensex was trading 426.34 points, or 0.55 per cent, lower at 77,433.85 points, while the Nifty was down 134.65 points, or 0.57 per cent, at 23,425.30 points.

Foreign institutional investors (FIIs) offloaded equities worth Rs 470.39 crore in the capital markets on a net basis on Friday, according to exchange data.

Meanwhile, India's forex reserves rose $1.05 billion to $630.607 billion for the week ended January 31, the RBI said on Friday.

In the previous reporting week, the overall reserves had increased by $5.574 billion to $629.557 billion.