Indian currency rupee on Wednesday touched yet another fresh low of 78.29 per US dollar, primarily due to growing concerns about rising inflation.
Inflationary concerns have led to aggressive monetary policy tightening by various central banks, bringing in the likelihood of a recession.
On Tuesday, the rupee closed the trade at 78.14 against the US dollar, data showed.
Back home in India, foreign portfolio investors pulling out money from the country for past consecutive eighth-to-nine months are also likely to have put pressure on the domestic currency, said analysts.
So far in June, foreign investors have pulled out around Rs 38,500 crore.
Near-term resistance for the rupee is seen at 78.85 per dollar and support at 77.60, said Dilip Parmar, Retail Research Analyst at HDFC securities.
"Rising crude oil prices, persistent high inflation, massive selling by FPI's and a widening current account deficit pushed the rupee down to its lowest level in history. Despite having adequate forex reserves, we believe rupee will remain under pressure (against the dollar) in the near term," said Piyush Chajed, Research Analyst at Choice Broking.
International crude oil prices have been above the psychologically crucial $100 per barrel mark, and inflation is at a multi-decadal high in advanced countries. Inflation in India, too, is above the permissible tolerance band at the moment.
"Rupee fell towards fresh all-time lows especially as the dollar rose against its major crosses. The greenback rose ahead of the Fed Chairman's testimony. The expectation is that the commentary could be hawkish and that could support the dollar at lower levels," said Gaurang Somaiya, Forex and Bullion Analyst, Motilal Oswal Financial Services.
Typically, the Reserve Bank of India intervenes in the market through liquidity management, including the selling of dollars from the foreign exchange reserves, with a view to preventing a steep depreciation in the value of the rupee.
India's foreign exchange reserves for the week that ended on June 10, 2022, declined by $4.59 billion to $596.46 billion, RBI data showed.
The latest decline in the reserves was on account of a sizable fall in Foreign Currency Assets (FCA), which is a major component of the overall reserves.
Prior to the previous week that ended on June 3, 2022, the total foreign exchange reserves were at $601.05 billion.
"FPI's have been net sellers in recent times and their future actions will influence the rupee future trajectory. The further depreciation of the rupee will negatively weigh down on the already high current account deficit," said Santosh Meena, Head of Research at Swastika Investmart.
( With inputs from ANI )
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