The rupee depreciated 38 paise to close at 95.46 (provisional) against the US dollar on Thursday, as Brent crude breached the USD 102 threshold, mounting concerns over the country's import cost trajectory.
Forex traders said the currency is currently facing opposing forces, with downside pressure driven by a resumption of foreign portfolio outflows, following positive flows in July and August and crude oil trading above USD 102 per barrel.
At the interbank foreign exchange market, the rupee opened at 95.15 against the US dollar, then lost ground to close at 95.46 (provisional) against the American currency, registering a loss of 38 paise from its previous close.
On Wednesday, the rupee slumped 34 paise to close at 95.08 against the American currency.
"The rupee has depreciated back towards 95.45, and it is important to understand that this is an oil-driven move rather than a dollar move, since the dollar itself is at multi-month lows," said Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities.
Banerjee said the currency is currently balancing a clear set of pressures. On the negative side, foreign portfolio outflows, which have resumed this month after being positive through July and August, crude above USD 100, and elevated US yields.
On the positive side, the rupee was supported by the Reserve Bank's active and effective presence in the market, strong domestic growth, and record foreign exchange reserves of over USD 740 billion.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 98.81, lower by 0.01 per cent.
Brent crude, the global oil benchmark, was trading higher by 1.28 per cent at USD 102.51 per barrel in futures trade.
On the domestic equities market front, Sensex climbed 138.36 points to settle at 74,902.59, while the Nifty gained 46.30 points to close at 23,477.80.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 582 crore on a net basis on Wednesday, according to exchange data.
