Rupee drops by 18 paise to 75.78 against dollar on forex outflows

The rupee dropped by 18 paise to an over 16-month low of 75.78 on Friday amid consistent foreign fund outflows and growing concerns about inflation.

At the interbank foreign exchange market, the rupee opened lower at 75.65 a dollar and later tanked to the day's low of 75.85 in line with a lacklustre trend in equity markets.

The local unit pared some of the losses in the closing session to end at 75.78 (provisional), its lowest closing level since June 22, 2020.

The rupee also declined for a third straight week with a weekly loss of 66 paise or 0.88 per cent against the dollar.

The US consumer inflation data for November would be released later on Friday with experts expecting the consumer price index (CPI) to rise further. The retail inflation had risen to 6.2 per cent in October which was the sharpest increase in 31 years.

Any hike in inflation would be seen as a case for tightening of monetary policy by the US Federal Reserve, which could lead to outflows of funds from emerging markets and riskier assets.

The US dollar index, which measures the greenback's strength against the basket of six currencies, firmed up to 96.25 and was heading for a weekly gain.

Oil benchmark Brent crude was up 0.40 per cent at USD 74.72 per barrel while oil for the Indian basket inched up 0.62 per cent at USD 74.28.

On the equity front, benchmark indices Sensex and Nifty closed almost flat amid late recovery in select energy, banking and IT stocks. Sensex slipped by 20.46 points to end at 58,786.67 while Nifty inched 5.55 points lower to 17,511.30.

Foreign investors withdrew Rs 1,585.55 crore on a net basis from Indian equities on Thursday, according to the exchange data.