The rupee fell against the US dollar on Wednesday as strong US retail data increased chances of Federal Reserve increasing it key rate this year. The rupee fell to 64.32 against the dollar, a level which was last seen on July 26. The dollar rallied to its highest level against a basket of major currencies in nearly three weeks. However, higher domestic equity markets helped support rupee at lower levels. The Sensex rose over 100 points to 31,603, led by buying in IT and FMCG stocks though it pared some of its gains later.

Here are five things to know to about rupee’s decline:

1) US retail sales rose the most in seven months in July as consumers spent more on 10 of 13 retails sectors. Further, upward revisions to sales for both May and June countered concerns that consumption had entered a downtrend and lifted the outlook for economic growth. Investors reacted by narrowing odds on the Fed tightening again this year and sent two-year Treasury yields up to 1.36 percent, from 1.29 percent on Friday.

2) Foreign investors, who have been a major contributor to the stock market rally this year so far, have turned net sellers of Indian equities this month so far. They have sold shares worth nearly Rs. 4,300 crore in August. Geo-political concerns have impacted global equity markets and also hit foreign inflows into emerging markets.

3) After surging nearly 7 per cent against the dollar this year, the rupee has witnessed some selloff this month as investors rushed to buy safe heaven assets like dollar and gold on geopolitical tensions.

4) Meanwhile, a report by news agency Reuters said the Reserve Bank of India (RBI) will likely have to drain up to $22 billion in excess liquidity from the financial system as surging foreign investments forces the central bank to absorb the dollar inflows and sell rupees to cap gains in the rupee.

5) As of 9.45 am, rupee was down 0.14 per cent against the dollar at 64.25, compared to Monday’s close of 64.12 while the BSE Sensex was nearly flat. (With Agency Inputs)