The rupee fell below the Rs12 psychological barrier last week against the dirham. Image Credit: Bloomberg News

Mumbai: A wider trade deficit, along with outflow of foreign funds and global cues weakened the Indian rupee to a fresh record low on Thursday.

The rupee touched a fresh all-time low of 70.39 against the US dollar during the day surpassing the previous low of 70.08 hit on Tuesday. It, however, recovered later to close at 70.1575 against the dollar, up 0.38 per cent.

“While we celebrated our 72nd Independence Day and our foreign exchange and interest rates markets were shut, a lot transpired in global markets. This time it was not the Turkish soup, but rather the Chinese Dragon. China is a long-term theme for EMs ... Chinese currency dropped to a fresh low for 2018 as 6.95 to a dollar on the CNH,” said Anindya Banerjee, deputy vice-president for currency and interest rates with Kotak Securities.

“However, technical trend remains firmly bullish for USDINR. Correction is welcome ... Nevertheless, a close below 69 on spot would impair the bullish USD view. Resistance is around 70.50 and then 71 and 71.50-72 levels on spot.”

On Tuesday morning, the Indian currency had plunged to 70.08 — its previous lowest ever mark — against the greenback.

As per the data released by the Ministry of Commerce and Industry on Tuesday, India’s merchandise trade deficit widened to $18.02 billion (Dh66.13 billion) during last month as against $11.45 billion in the corresponding period the previous year.

“India’s trade deficit has widened sharply ... This is a trigger for today’s fall in the rupee. Even though the Turkish Lira has recovered, the dollar index continues to move higher. Rupee is expected to remain under pressure in next few sessions,” Rushabh Maru, Research Analyst, Anand Rathi Shares and Stock Brokers, told IANS.

“Even if the rupee appreciates, the appreciation won’t sustain for long due to global uncertainty.”

Recent US sanctions and tariffs on Turkey has had an impact on its and other emerging market currencies over fears of further global protectionist measures.