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The Indian rupee remains under pressure for the third consecutive day as the domestic currency hit a record low of Rs 88.79 against the US dollar on Wednesday. The weakening of the rupee followed after solid FII outflows, a sharp hike in US H1-B visa fees and RBI's limited intervention.

Earlier, the rupee closed at 88.76 against the dollar on Tuesday, down by 46 paise from the previous close.

1) FII outflows: Analysts suggest the dominant driving factor impacting the rupee’s weakness has been sustained selling by foreign portfolio investors (FPIs). 

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On Tuesday alone, FPIs sold equities worth around Rs 3,551 crore, worsening the position of the Indian currency, as global investors become more cautious amid geopolitical uncertainty and tighter global liquidity.

Jolted by the rupee’s weakening, some importers bought dollars in bulk to ensure they remain hedged. This strategy added fresh demand for the greenback and pushed the rupee further down.

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H1-B visa fee hike: The H-1B visa announcement by Donald Trump, which involves a one-time fee of $100,000 for new applicants, has contributed to the weakening of the Indian rupee.

The steep fee hike raises concerns about the outlook of Indian tech companies that are heavily reliant on business from the US.

The visa policy reform, with existing U.S. tariffs on Indian goods, is considered a broader risk to India’s external earnings and confidence in the currency. 

RBI's limited intervention: The Reserve Bank of India (RBI) has intervened to manage volatility. However, analysts suggest that the intervention is limited and may allow the rupee to weaken slightly amid rising US tariffs and H-1B visa fees affecting India's IT sector and remittances.

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Currently working as a trainee Sub-Editor at Zee Business, Shristi Rani is passionate about storytelling and delivering content that engages diverse audiences across digital platforms.

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