The Indian rupee sank to a historic low today as the dollar strengthened and crude oil prices rose. The Indian rupee dropped to 77.82 against the US dollar. The rupee fell to 77.81 before settling at 77.74 on Thursday.

Also Read| Explained: Impact of RBI’s repo rate hike on deposits, loans

The currency was also pushed down by weak domestic equity markets. In early trade on Friday, the benchmark Sensex was down 600 points. According to analysts, the rupee fell as a result of the dollar index’s rise and the European Central Bank’s (ECB) indication to raise interest rates at its July policy meetings.

Also Read| How inflation affects RBI’s interest rate policy

Five reasons behind Rupee’s fall:

1. The European Central Bank (ECB) joined the tightening campaign on Thursday, declaring the conclusion of its bond-buying programme and indicating that rates will be raised multiple times this year.

Also Read| Explained: Changes in repo rates and their impact on stock market

2. Oil prices dipped today but remained close to three-month highs. Brent crude futures fell $1.01, or 0.8%, to $122.06 a barrel in August, but were on course for a fourth consecutive weekly rise. India imports the majority of its petroleum needs, therefore a rise in oil prices raises domestic inflation.

Also Read| Explained: Impact of MPC meeting on stock market

3. In May, India’s trade deficit increased to $23 billion. Exports increased 15.4% year on year to $37.3 billion, but down 7.2% month on month. Imports, on the other hand, increased 56.1% to $60.6 billion.

Also Read| How US Fed rate hike impacts the Indian rupee

4. According to stock exchange statistics, foreign institutional investors were net sellers in the capital market on Thursday, offloading shares worth Rs 1,512.64 crore.

Also Read| Explained: Correlation between bond yield and economy

5. The Current Account Deficit (CAD) has moderated to $17.3 billion or 1.96% of GDP in the fourth quarter of FY22 as against USD 8.2 billion or 1.03%  in the year-ago period, and massively down from $23.02 billion or 2.74% in Q3, which was a 13-quarter high, according to India Ratings.