The rupee on Thursday tumbled to an all-time low against the dollar, while benchmark stock indices Sensex and Nifty waltzed their way to life-time highs.
The Indian currency got dragged down by the strength of the greenback, demand from local importers and a weak Chinese yuan.
The absence of the Reserve Bank of India (RBI), which frequently intervenes by supplying dollars, contributed to its decline.
At the inter-bank forex market, the domestic unit settled at 83.65 to the dollar, a 20 paise drop over its previous close of 83.45. In intra-day trades, the currency hit an historic intra-day low of 83.66.
The stock markets spun a different tale as the 30-share BSE Sensex climbed 141.34 points or 0.18 per cent to settle at a new closing peak of 77478.93. During the day, it surged 305.5 points or 0.39 per cent to a high of 77643.09.
The NSE Nifty rose 51 points or 0.22 per cent to settle at its fresh closing high of 23567. Intra-day, it soared 108 points or 0.45 per cent to 23624.
Forex circles cited multiple reasons for the rupee coming under pressure — including a strong dollar as reflected by the dollar index (DXY) which measures its strength against a basket of six currencies. The DXY was trading at 105.50 after rising to a day’s high of 105.53 against its previous close of 105.25.
The rise of the dollar was attributed to elevated geopolitical tensions as Russia resumed its attack on Ukraine’s power grid, while Kyiv’s forces targeted Russian oil facilities with cross-border drone strikes.
It also came on account of expectations that the US Federal Reserve will keep the interest rates elevated for a longer period.
The weakness in the Chinese currency which impacted other Asian units weighed on the rupee.
This came after the People’s Bank of China (set the yuan’s reference rate at 7.1192, which reportedly was the weakest since November 2023. It led to the yuan falling to a seven month low.
Forex circles said the RBI, which has kept the rupee in a tight band so far this year, was not active in the markets.
Experts said continuing inflows into the debt markets would provide support to the rupee.
In the run-up to the inclusion of Indian sovereign bonds in JP Morgan’s Emerging Market Index on June 28, FPIs have purchased ₹63,300 crore of bonds in this calendar year.
Stock party
The Sensex was fuelled by intense buying in heavyweights Reliance, ICICI Bank and HDFC Bank amid a recent surge in foreign capital inflows.
Besides, stable global crude prices extended support to capital markets amid investors looking for fresh triggers, traders said.