Rupee Hits Record Low: Can an India-US Trade Agreement Reverse the Slide?

The Indian rupee has tumbled to record lows against the US dollar, even as the dollar index itself has weakened. Lingering concerns about the absence of a significant trade agreement between India and the United States, coupled with substantial outflows from foreign investors, are weighing heavily on the currency.

On Friday, December 12, the rupee plunged to an intraday low of 90.56 against the dollar, a fall of 24 paise from its previous closing value. The rupee ultimately closed at 90.49, down 17 paise for the day.

Data indicates that foreign portfolio investors (FPIs) are continuing their selling spree. In December alone, FPI outflows have reached ₹17,955 crore. The total selloff for the year has now climbed to ₹161,630 crore, according to figures from the National Securities Depository Limited (NSDL).

Recent talks between India and the US concluded on Thursday with both countries exchanging perspectives on trade-related matters, including ongoing negotiations for a mutually beneficial bilateral trade agreement, according to a PTI report.

Prime Minister Narendra Modi and US President Donald Trump also discussed ways to maintain momentum in the bilateral economic partnership during a phone call on Thursday, adding to speculation that a long-awaited trade deal might be within reach.

Given these developments, the key question is whether a finalized trade agreement between India and the US could trigger a meaningful recovery in the Indian rupee.

According to Harshal Dasani, Business Head at INVAsset PMS, the rupee's decline is driven more by India-specific factors than broad dollar strength.