The rupee fell 44 paise and fell below the 81-mark against the US dollar in early trade on Friday, weighed down by the strong US currency and risk-off sentiment among investors.
Forex traders said the escalation of geopolitical risk in Ukraine and rate hikes by the US Federal Reserve and the Bank of England to combat inflation had dampened risk appetite.
Furthermore, the strength of the US dollar in the international market, a downward trend in domestic equities, and risk-off sentiments as the geopolitical risk in Ukraine escalated weighed on the local currency.
The rupee opened at 81.08 against the US dollar on the interbank foreign exchange, then fell to 81.23, a 44-paise drop from its previous close.
The rupee fell by 83 paise on Thursday, its most significant single-day loss in nearly seven months, to close at an all-time low of 80.79 against the US dollar.
The Bank of England increased its key interest rate by 50 basis points (bps) to a 14-year high of 2.25 per cent.
The Bank of Japan intervened in the foreign exchange market for the first time in 24 years to stem a falling Yen after keeping rates at record lows, according to IFA Global Research Academy, while the Swiss National Bank hiked rates by a record 75 basis points to 0.5%.
The Federal Reserve of the United States raised interest rates by 75 basis points to 3-3.25 per cent.
On Thursday, the RBI was conspicuously absent from the spot market as the rupee fell by 1%, possibly because it wanted the rupee to catch up, according to Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors.
“All major events are over for this month as we await RBI’s MPC to give its verdict on September 30, 2022,” Bhansali added.
Meanwhile, the dollar index, which measures the strength of the US currency against a basket of six currencies, rose 0.05 per cent to 111.41.
Brent crude futures fell 0.57 per cent to USD 89.94 per barrel, the global oil benchmark.
The 30-share BSE Sensex was trading 558.59 points, or 0.94 per cent, lower at 58,561.13, while the broader NSE Nifty was down 153.10 points, or 0.87 per cent, at 17,476.70.
According to exchange data, foreign institutional investors were net sellers in the capital market on Thursday, offloading shares worth Rs 2,509.55 crore.