The Indian rupee declined to a lifetime low on Tuesday, pressured by the U.S. dollar's rally against its major peers and on concerns over the Asian country's slowing growth rate.
The rupee dipped to a record low of 84.7425 against the dollar, inching past its previous all-time low of 84.7050 hit on Monday. Its Asian peers were mostly weaker, with the offshore Chinese yuan dropping to its lowest in a year, while the dollar index rose to 106.50 on back of weakness in the euro.
The decline in the rupee from 84.50 to the current level "has been without much resistance, relatively speaking", a currency trader at a bank said.
"The price action suggests that either the Reserve Bank of India's (RBI) intervention has been comparatively mild or that the underlying dollar demand is too much. Either way, it is a worrying sign (for the rupee)," the trader said.
The rupee declined by 0.25% on Monday in the wake of India's disappointing GDP data. This is the currency's biggest percentage fall in six months.
The extent of the rupee's decline, while broadly in line with Asian peers, was a surprise for bankers and corporates considering that the RBI over the last several months has been persistently intervening to hold up the currency at key levels.
India's weak GDP growth will likely further dent portfolio investor sentiment, Dhiraj Nim, an FX strategist and economist at ANZ, said in a note.
The country's "inferior macro configuration" alongside the recent decline in the RBI’s FX reserves sharply suggest that a "weakening path for the rupee looks inevitable", he said.
India's foreign exchange reserves have dropped for eight straight weeks to fall to their lowest in five months.