The rupee slipped past the psychologically crucial 83 per dollar level on Wednesday to end the day at a record closing low of 83.02 due to a host of factors, including demand for dollars from energy companies, stop losses getting triggered, weakness in emerging market currencies and rising US Treasury yields.

The rupee closed 66 paise (or 0.80 per cent), weaker than the previous close of 82.36.

RK Gurumurthy, Head-Treasury, Dhanlaxmi Bank, said: “Today’s sharp weakness was a result of a motley combination of short squeeze (stops getting triggered), accumulated demand for dollars as rupee’s brief strength last few days must have put near term import covers in false comfort. 

“Chinese yuan’s weakness, US Treasury yields firming up and dollar index remaining firm against EM currencies was also a collaborative cause.”

The rupee opened at 82.31, and for quite some time, it was between the 82.35 and 82.39 range in the first half of the session.

Heavy buying

“There was news of heavy buying aggregating about $1 billion in the market from two energy companies. Repayments by these two companies are due only next month but fear that rupee will depreciate even more if the US Fed increases interest rate by 75 basis points prompted them to step up dollar purchases,” said the chief dealer of a private sector bank.

IFA Global, in a report, observed that the primary reason for this weakness was the dollar buying by oil companies and FPI custodian banks.

“The dollar index, on the other hand, shows strength as it is up by 0.8 per cent and at the level of 112.9. Weakness in GBP and Euro is a major reason for this along with an initial selling in European equity markets,” per the report.

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