Rupee plunges 40 paise to 20-month low against dollar on low risk appetite

The rupee plunged by 40 paise to a 20-month low level on Wednesday as muted trend in domestic equities, consistent foreign fund outflows and risk-averse sentiments weighed on the local unit.

At the interbank foreign exchange market, the rupee opened lower at 76.05 a dollar and later fell to a low of 76.28, down by 40 paise over the previous close.

The rupee had closed near this level on April 24, 2020, previously.

On Tuesday, the rupee had declined by 10 paise to close at 75.88 against the US dollar.

Traders said the decline in the rupee has also been driven by the fear of the rapid spread of the Omicron variant.

Meanwhile, the US dollar index, which measures the greenback's strength against the basket of six currencies, fell 0.12 per cent to 96.45.

"Rupee depreciated further and fell below 76 level today following dollar demand and risk-averse sentiments. So far this month, nine out of eleven trading sessions, rupee depreciated following policy divergence between RBI and US Fed, along with foreign fund outflows from domestic equities," Dilip Parmar, Research Analyst, HDFC Securities, said.

The rupee weakened due to higher trade deficit number and surge in wholesale price, Parmar said.

There is some modest weakness in the dollar index ahead of FOMC decision later tonight. However, dollar bulls remain largely in control of proceedings over the long run with dollar index holding above psychological level of 96, he added.

Brent crude futures, the global oil benchmark, fell 1.06 per cent to USD 72.92 per barrel.

Foreign institutional investors remained net sellers in the capital markets, pulling out Rs 763.18 crore on Tuesday, as per provisional data.

On the domestic equity market front, the BSE Sensex ended 329.06 points or 0.57 per cent lower at 57,788.03, while the broader NSE Nifty declined 103.50 points or 0.6 per cent to 17,221.40.