The rupee recovered marginally by 4 paise in trade and was trading at 54.83 against the dollar. Today's recovery was after the huge slide on Thursday following a sell-off in domestic equities.
Dealers say that the rupee is likely to come under pressure as foreign flows dry up as India's economic fundamentals continue to deteriorate.
On Thursday foreign funds net sold to the tune of Rs 326 crores. In fact, there have been very few days in 2013 when foreign funds have net sold in Indian equities.
India's CAD rose to a historic high of 6.7 per cent of GDP in the last quarter ending December 31, 2012. Dealers are worried that the worsening CAD could continue to put pressure on the rupee. The good news, however, is that international prices of crude oil is dropping, which should provide relief to India's import bill and hence the trade deficit.
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