Foreign fund flows which were a staggering $7 billion in the first three months of the year had thus far managed to sustain the rupee. However, the month of April saw net outflows and drying up of foreign funds, which has also impacted the rupee.
On the other hand there is a sustained demand for the dollar from crude importers. Marketmen are worried that the rupee may now breach its historic low of 54.31 hit in mid December.
Weakening fundamentals of the Indian economy are causing havoc with the currency. This is bound to widen the current account deficit, make oil imports costlier and hence widen the fiscal deficit as well.
However, analysts believe that a rapid reform process will help bring in fresh foreign fund inflows and improve the fundamentals of the economy and hence the rupee.