Indian Rupee plunges 26 paise; hits 71-mark against US dollar

In opening trade today, Indian rupee slumped to a fresh record low of 71 against the dollar for the first time ever by falling 26 paise on persistent demand for the US currency amid rising crude prices. The latest round of US-China trade tensions is termed to have further given a boost to the dollar.

At the Interbank Foreign Exchange (Forex) market, the domestic currency opened lower at 70.95 a dollar and slipped further to hit its lifetime low of 71 from its previous close of 70.74.

Forex dealers reportedly said that besides robust month-end demand for the US currency from oil importers, dollar's strength against its rival currencies on expectations of rising interest rates amid lingering Sino-US trade tensions, weighed on the domestic currency.

The partially convertible rupee was trading at 70.93/94 per dollar, compared with its previous close of 70.74, said a Reuters report, adding that it touched 71 per dollar in opening deals before recovering slightly on the back of dollar sales by state-run banks.

Traders reportedly said the Reserve Bank of India was likely sporadically selling dollars through state-run banks to prevent a sudden sharp fall but traders do not expect any major intervention as the fall has been in line with fundamentals.

Yesterday, the domestic unit slid further by 15 paise to close at a fresh lifetime low of 70.74 to the dollar due to strong demand for the greenback from oil importers and surging crude oil prices stoking inflation fears.

Growing fears about rising inflation in amid high global crude oil prices and consistent outflow of foreign funds from the domestic equity market also weighed on the domestic currency.

According to Reuters, India`s economy likely sustained strong growth momentum for a second straight quarter in April-June, but the depreciating rupee and monetary tightening pose risks for coming periods. 

The Reuters poll median forecast was 7.6 percent annual growth, compared with the 13-quarter low of 5.6 percent for a year earlier, when many companies cut production before the launch of a nation-wide sales tax.

The rupee has weakened nearly 10 percent against the dollar this year, touching a record low of 70.8250 to the dollar on Thursday, and is the worst performing currency in Asia.

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Credit ratings agency Moody`s has also warned about rising pressure of higher oil prices and interest rates on government finances and India`s current account.