The rupee weakened further by 19 paise Wednesday to close at 71.24 against the US dollar amid a strengthening greenback and fresh capital outflows.
Higher bond yields, which spiked on concerns that the government may over-shoot the fiscal deficit target in an election year, too weighed on the domestic unit, forex traders said.
The rupee has now lost a hefty 83 paise in four straight sessions.
Meanwhile, the pound rallied after British Prime Minister Theresa May’s divorce deal to leave the EU was overwhelmingly rejected by MPs, leading to speculation that UK lawmakers may be forced to have a re-look at the entire Brexit process.
The rupee opened on a weak note at 71.10 at the interbank forex market and lost further ground to reach an intra-day low of 71.27.
However, it pared some losses to finally finish at 71.24 per US dollar, down 19 paise over its previous close of 71.05.
“Indian rupee depreciated for the fourth day in a row amid higher bond yield and expectation of expansionary fiscal policy in coming budget. The rupee was Asia’s worst performing major currency in 2018 when it lost 9 per cent versus the dollar, and it’s still in the cellar for 2019 so far,” said V K Sharma, head of PCG and Capital Markets Strategy, HDFC Securities.
Sharma further noted that “India sovereign bond yields spiked today, as market started pricing farm-relief package and a federal budget, which is likely to be in February first week.”
The US dollar gained against key currencies overseas, while rise in demand for the greenback from exporters also pressured the domestic unit, traders said.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.03 per cent to 96.06 in late afternoon trade.
Easing crude oil prices supported the domestic currency to some extent.
Brent crude, the global benchmark, was trading at $60.48 per barrel, lower by 0.26 per cent.