Key reasons why the rupee is falling

Zee Media Bureau

The rupee on Tuesday opened substantially lower at 66.85 per dollar from overnight closing level of 66.73 at the Interbank Foreign Exchange due to strong dollar demand in the wake of sustained foreign capital outflows.

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However, the home currency recouped its early losses on fresh dollar selling and touched session's high of 66.71 before retreating back to conclude at a two-year low of 66.84, revealing a fall of 11 paise, or 0.16 percent. It had last ended at 67.07 on September 4, 2013.

Here are the key reasons of rupee's fall:

-Consistent demand for the American currency from banks and importers.

-Extreme volatility in domestic equities as well as expectations that the Federal Reserve is on track to raise interest rates for the first time since 2006 predominantly impacted the rupee sentiment. The robust US macro and jobs report cemented a Fed lift-off this month.

- Sustained foreign capital outflows. 

-The US dollar remained broadly stronger against the commodity linked currencies after Chinese exports fell for the fifth consecutive month added to fears over a slowdown in the world's second-largest economy.