Why is Rupee falling against US dollar?

Indian Rupee on Thursday hit its record low of Rs 70.96 against the US dollar; as it fell by 22 paisa in the morning trade.  On Thursday, it came to a close at fresh lifetime low of 70.74 against the dollar as it slid by 15 paisa.

As per reports, the fall came due to strong demand for the greenback from oil importers and surging crude oil prices stoking inflation fears.

The local unit dwindled down to hit a historic intra-day low of 70.90 in early trading - a level that was unthinkable only a few weeks ago.

However, sporadic intervention by the RBI at various levels limited further losses and triggered some recovery towards the close. At the same time, the bond yield curve also rose dramatically to 7.93 per cent.

Strong month-end demand for the US currency mainly from oil importers along with currency futures expiry related purchases predominantly weighed heavily on the forex market and haunted investor sentiment.

Growing fears about rising inflation in the midst of high global crude oil prices and consistent outflow of foreign funds from the domestic equity market also weighed down on the domestic currency.

Crude prices firmed up further on growing evidence of disruptions to supply from Iran and Venezuela and after a fall in US crude inventories.

Benchmark Brent crude oil was at USD 77.65 a barrel in early Asian trade.