The rupee slipped 1 paisa to an all-time low of 84.40 against the US dollar in early trade on Thursday, weighed down by unabated foreign fund outflows and strong dollar demand from investors.

Forex traders said the downward pressure on the USD/INR pair is largely driven by persistent inflation and significant foreign outflows.

At the interbank foreign exchange, the rupee opened at 84.40 against the greenback, registering a fall of 1 paisa over its previous close.

On Wednesday, the rupee moved in a narrow range and settled flat at 84.39 against the US dollar.

"... the Reserve Bank of India (RBI) has stepped up as the rupee’s primary protector. The central bank has intervened by selling dollars to support the currency, though this has led to a dip in India’s forex reserves, which now stand at USD 682 billion, down from a peak of USD 704 billion," CR Forex Advisors MD Amit Pabari said.

Pabari further added that "given the current landscape, the USD/INR is likely to trade within a range of 83.80 to 84.50, with a slight bias towards the lower end of this range." Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.18 per cent at 106.66.

Brent crude, the global oil benchmark, fell 0.46 per cent to USD 71.95 per barrel in futures trade.

On the global front, China’s recent 1.4 trillion yuan stimulus, coupled with expectations of more fiscal support, has strengthened Chinese markets and added downward pressure on Indian assets, traders said.

Moreover, India’s inflation surge is adding additional pressure on the currency.

Retail inflation breached the RBI's upper tolerance level, soaring to a 14-month high of 6.21 per cent in October mainly on account of rising food prices.

Inflation based on the consumer price index (CPI) was 5.49 per cent in September and 4.87 per cent in the year-ago month.

On the domestic equity market front, Sensex was trading 39.66 points, or 0.05 per cent higher, at 77,730.61 points. The Nifty rose 15.55 points, or 0.07 per cent, to 23,574.60 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, as they offloaded shares worth Rs 2,502.58 crore, according to exchange data.

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