Rupee on a tailspin, hits a new low of 70.82 a dollar

The rupee continued its downward march, hitting a lifetime low of 70.82 against the US dollar, down 23 paise from yesterday’s close, on heavy month-end dollar demand and sustained foreign fund outflows.

The rupee opened trading on the interbank foreign exchange market at 70.57 against the previous close of 70.59, but lost ground on increased dollar demand. It hovered in a range of 70.82 and 70.57 before quoting at 70.78, down 19 paise at 9.20 am local time.
Forex dealers cited increased demand for dollar from importers, mainly oil refiners in view of surging crude oil prices, and sustained outflows from stock markets. A stronger dollar also put pressure on the Indian currency.
Analysts say rising oil prices, broader emerging market concerns and strong month-end dollar demand have combined to hammer the rupee. The rupee has fallen 10.97 per cent since the start of the year.
"Weakening has accompanied rising investment concerns about emerging markets more broadly, as well as a widening current account deficit, itself largely the result of higher oil prices," said a Deutsche Bank Wealth Management report on Thursday.
Crude oil is the most expensive item on the country’s import bill, which continues to climb despite government’s plans to rein in trade deficit. Higher oil prices also lead to a widening current account deficit for the country, which depends on overseas sources for 80 per cent of its oil demand.
Oil prices have gained more than 7 per cent since mid-August, while oil prices have gained nearly 11 per cent this year. Combined with end-of-the-month dollar demand caused a sell-off in the forex market.
The rupee, which continued to fall, logging its biggest fall of 110 paise against the dollar on 13 August, is down at 70.82 against the dollar.
Meanwhile, in overseas markets, the dollar index against a basket of six major currencies struggled near a four-week low of 94.434 touched on Tuesday.