Mumbai, Jan 3 (PTI) The rupee weakened for the second straight session Thursday, slipping by 2 paise to 70.20 against the US dollar on robust foreign fund outflows amid rising trade deficit worries.

Meanwhile, the yen surged to multi-year highs on safe-haven buying following a ‘flash crash’ that spooked the global currency markets.

Forex traders said rising domestic fiscal deficit worries, firming crude prices and sustained foreign fund outflows weighed on the local unit.

At the Interbank Foreign Exchange (forex) market, the rupee opened lower at 70.30 and fell further to touch the day’s low of 70.53.

The domestic currency, however, pared some losses and finally ended at 70.20 per dollar, down by 2 paise against its previous close.

On Wednesday, the rupee had tumbled 75 paise to 70.18 against the American currency.

“Fiscal concerns around the government’s farm relief package has prompted 10 year G-sec yields to move up 20 bps over the past few days,” said Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management.

The rupee traded marginally lower “possibly due to rising trade deficit worries”, he added.

Reports said the government was contemplating direct transfers worth Rs 4,000 an acre per season for farmers, among other incentives to address farm distress, which will likely have a substantial financial implication on the exchequer.

Meanwhile, the dollar index dropped by 0.17 per cent to 96.65 due to concerns over weak economic growth amid no signs of an end to the partial US government shutdown.

Brent crude, the global benchmark, was trading at USD 55.21 per barrel, higher by 0.55 per cent.

Foreign funds pulled out Rs 972.81 crore from the capital markets on a net basis Thursday, while domestic institutional investors bought equities to the tune of Rs 34.52 crore, provisional data showed.

Benchmark Sensex plummeted over 377 points Thursday to end at 35,513.71, while the broader NSE Nifty plunged 120.25 points to 10,672.25.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.3627 and for rupee/euro at 79.9208. The reference rate for rupee/British pound was fixed at 88.2756 and for rupee/100 Japanese yen at 65.80.

This is published unedited from the PTI feed.