Mumbai: The rupee fell sharply by 47 paise to settle at 87.19 against the US dollar on Tuesday due to month-end dollar demand by importers amid uncertainty over US trade tariffs.
Elevated greenback against major crosses and sustained FII outflows also contributed to the decline in the domestic unit, forex traders said.
At the interbank foreign exchange, the rupee opened weak at 86.83 and kept losing ground through the day before settling at 87.19, lower by 47 paise over its previous close.
The local unit had settled at 86.72 on Monday.
“The rupee fell sharply against the US dollar amid uncertainty over US trade tariffs and demand from importers towards the end of the month. Covering of short positions due to the expiry of the futures contract, too, weighed on the rupee.
“We expect the rupee to trade negative on the back of overall weakness in the domestic markets and persistent FII outflows. Any recovery in the US dollar may also weigh on the rupee. However, any intervention by the RBI and weakness in crude oil prices may support the rupee at lower levels,” Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.04 per cent to 106.64.
“The dollar clawed back some losses after falling to its lowest in 2 months buoyed by safe-haven flows after the US president said that tariffs on Mexico and Canada would go ahead as planned,” Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
Brent crude, the global oil benchmark, declined 0.12 per cent to 74.69 per barrel in futures trade.
Foreign institutional investors (FIIs) offloaded equities worth Rs 6,286.70 crore on a net basis on Monday, according to exchange data.
USD/INR spot price is expected to trade in a range of Rs 86.85 to Rs 87.40, Choudhary said.