The Indian rupee fell to a record low, as dollar strength dampened demand for riskier assets and foreigners continued to dump the country’s stocks.
The rupee on Monday fell 0.3% to 77.1825 per dollar, having touched a previous record low of 76.9812 in March.
Foreign funds have pulled out $17.7 billion from Indian equities this year, the highest on record, as the prospect of an aggressive tightening by global central banks spooked markets.
The currency has also been impacted by other adverse conditions including a widening current account deficit and a jump in global crude oil prices. Even the Reserve Bank of India’s out-of-cycle rate hike last week has not been able to stop the rupee’s fall.
BNP Paribas strategists Siddharth Mathur and Chidu Narayanan wrote in a note, “RBI’s recognition of the need for urgency in policy normalization is a source of support. However, as equity inflows may dominate interest-rate sensitive inflows, there is a higher downside risk to the INR from declining equity market sentiment as a result of increasingly tightening of domestic financial conditions.