New Delhi:Â The Indian rupee slumped nearly 1% on Tuesday to register a 13-month low of 63.53 per dollar. This is the weakest level for the rupee since November 13, 2013 when it hit a low of 63.90 per dollar.
Here are the reasons for the sharp weakness in the rupee,
1) Risk assets including equites are under pressure amid rising concerns about the global economy. Sliding oil prices and a downbeat China factory survey weighed on Asian shares on Tuesday, while the rouble jumped after Russia sharply increased its benchmark interest rate in a bid to halt a collapse in its currency.
2) The rupee has come under selling pressure tracking steep losses in emerging market currencies. On Monday, the Indonesian rupiah hit a 16-year low amidst a slump in crude prices and worries about US rate hikes expected next year.
3) A slew of negative data points have hit domestic sentiments, analysts say. Trade deficit widened to $16.9 billion in November – an 18 month high. A year ago, trade deficit was under $10 billion. The unexpected contraction in industrial output in October has sparked concerns about economic growth.
4) Foreign funds have sold shares in each of the last five trading sessions until Monday, putting pressure on the rupee, analysts say.
5) Expectations of a rate cut have led to softening of bond yields and put pressure on the currency, analysts say.
By 11:33 a.m., the partially convertible rupee was at 63.44 per dollar versus its Monday’s close of 62.94/95.