The plunged by 48 paise to close at record lows of 78.85 provisional against the US on Tuesday, weighed down by persistent foreign capital outflows and a surge in crude oil prices.
The foreign exchange market opened lower at 78.53 against the dollar and settled at 78.85, down 48 paise over its previous close.
The American currency touched a new all-time low of 78.8550 during the session.
The Indian rupee touched an all-time low against the US on the back of weak domestic equities and a surge in crude oil prices. Anuj Choudhary Research Analyst at Sharekhan said that foreign investors' continued selling of the currency put downside pressure on Rupee.
The rupee is expected to trade on a negative note on risk aversion in domestic markets and continued selling pressure from foreign institutional investors FIIs Elevated oil prices may also weigh on the domestic currency, according to Choudhary.
The Indian rupee touched a new all-time low of 78.85 against the US on the back of a lack of capital market participation and FII's outflows in the recent past. A surge in crude oil prices from USD 105 to USD 114 also caused the pressure on rupee skidding to go down, said Jateen Trivedi, VP Research Analyst at LKP Securities.
The rupee has fallen by 100 paise in a matter of six trading days because of the continued selling by foreign investors and FED's hawkish tone.
If Crude prices are falling, further weakness can be seen, he noted.
Religare Broking said the Indian rupee plummeted to fresh lows and depreciated by around half a per cent against the dollar owing to a muted trend in domestic equities and strong gains in crude oil prices.
The supply crunch is helping regain traction for oil prices as OPEC members Libya and Ecuador suspend oil output due to political unrest. All eyes are on the G-7 meeting for more cues as the member nations are contemplating a new set of sanctions, including a proposal to place a price cap on Russian oil imports.
Oil prices on the higher incline could be hampered by high demand from the US and the relaxation of restrictions in China, and could cause a major blow to the domestic currency, Sachdeva said.
The worry of a global growth slowdown is triggered by tightening financial conditions and elevated inflation, while favoring the safe-haven dollar index.
We believe that the rupee-dollar exchange rate will remain weak in the near-term, where it can test 79.20 against the US dollar. The Indian rupee is likely to be cushioned by the fact that RBI will use its FX reserves to curb excess volatility in the Indian rupee, which will give some cushion to the domestic currency, Sachdeva said.
The dollar index, which gauges the strength of the dollar against a basket of six currencies, was trading 0.01 per cent higher at 103.95.
Markets are assessing their expectations of a Fed rate hike. The US consumer confidence data is expected to worsen from the previous month, so traders may take cues from the US consumer confidence data.
Markets may take a cue from Fed Chair Jerome Powell's speech at the ECB forum later this week. In the near-term, the rupee may trade in the range of 78 - 79.50, according to Choudhary.
The global oil benchmark for crude futures increased by 1.89 per cent to USD 117.26 per barrel.
On the domestic equity market front, the 30 share BSE Sensex ended up with 16.17 points or 0.03 per cent higher at 53,177. The NSE Nifty grew by 18.15 points or 0.11 per cent to 15,850, while the broader NSE Nifty increased by 18.15 points or 0.11 per cent. Foreign institutional investors offloaded shares worth Rs 1,244 on Tuesday, which was net sellers in the capital market. According to stock exchange data, 44 crore were reported to be in possession of.