Rupee Plunges to Record Low, Breaching 91 Against US Dollar
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The Indian rupee weakened to a record low of 91.07 against the US dollar amid foreign fund outflows and trade uncertainties. Analysts foresee continued pressure.
The Indian rupee has depreciated to an unprecedented low, surpassing 91 against the US dollar for the first time ever. This decline occurred amidst consistent outflows of foreign funds and ongoing uncertainty surrounding international trade.
The rupee's value has been steadily decreasing in recent trading sessions, contributing to its current record low. On Tuesday, the rupee was trading at 91.075 against the dollar as of 11:38 AM.
According to VK Vijayakumar, chief investment strategist at Geojit Investments Limited, the sharp decline was unexpected, particularly given the better-than-expected trade data for November. He noted that continuous selling by Foreign Institutional Investors (FIIs) is creating a negative cycle, pushing the rupee down. While the Reserve Bank of India (RBI) typically intervenes by selling dollars to stabilize the rupee's value, Vijayakumar explained that the central bank's current policy appears to allow for currency depreciation, likely due to India's low inflation rate (0.71% in November). He suggests that rupee depreciation isn't significantly harming the economy, and the reduced trade deficit in November is a positive sign for the rupee.
Analysts anticipate continued pressure on the rupee in the near future. Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, suggests that delays in a trade deal between India and the US, coupled with FII outflows, are expected to maintain a downward pressure on the rupee. Choudhary added that a weaker dollar or potential intervention by the RBI could provide some support. He projects the USD/INR spot price to fluctuate between Rs 90.30 and Rs 91, and that investors will be closely monitoring monetary policy decisions from central banks including the Bank of England (BOE), the European Central Bank (ECB), and the Bank of Japan (BoJ). The rupee had already fallen 17 paise last Friday, closing at a then-record low of 90.49 against the US dollar. On Monday, it opened at 90.53 at the interbank foreign exchange market.
