On Wednesday, the rupee fell to a new low against the dollar, as domestic stock markets tumbled and overseas investors showed no signs of letting up on sales of Indian equities.
The domestic currency was trading 0.2 per cent lower against the 78.95 $1 at the end of the day. The rupee had settled at a record closing low of 78.77 per US dollar on Tuesday.
The BSE Sensex and the NSE Nifty were trading 0.6 per cent lower than the previous close at 10: 15 IST.
Asian stock markets suffered losses after weak US consumer confidence data dragged US stocks lower amid fears of higher interest rates hurting economic growth.
The largest monthly outflow in 2022 is 3 billion of stocks so far in June. Foreign investors have net sold $28.3 billion of equities in the last year.
Currency dealers expect the rupee to soon surpass the 79 per mark even though the Reserve Bank of India is said to be intervening in the foreign exchange market around current dollar levels.
The rupee has dropped around 5.8 per cent against the dollar in 2022, and a surge in global has clouded the outlook on the currency.
Some traders had racked up large losses following a rush to cover large outstanding positions in the futures market on Tuesday and dealers said that the exchange rate would continue to fluctuate in the near term.
There was a chance that the RBI might have intervened by selling USD INR in exchange and Open Interest was seen building up to $4.8 billion a couple of days before the end of the year. This position was bought by large corporates, traders and banks. Amit Pabari, CR Forex Advisors Managing Director Amit Pabari wrote that they had taken a contra short position in the OTC market to offset this buy position.
Yesterday traders started winding up their huge short position and that resulted in a sharp up move in the USDINR. Since 100 million have 1 paise move in Rupee, the $4.8 billion had to impact 48 paise.