Rupee Hits Record Low, Breaches 91 Against US Dollar in Intra-Day Trading

The Indian rupee has depreciated sharply, falling below the 91 mark against the US dollar during intra-day trading for the first time ever. This decline follows a weakening trend over the past few trading sessions, with the rupee losing 1% of its value against the dollar in the last five sessions alone.

Around 11:45 AM, the rupee was trading at 91.14 against the US dollar, a fall of 36 paise from its previous closing value. The domestic currency opened at 90.87 against the greenback in the interbank foreign exchange market and continued to slide downwards as the trading session progressed.

On Monday, the rupee had already reached a new all-time low of 90.78 against the US dollar, declining 29 paise. Market analysts attribute this fall to several factors, including uncertainty surrounding a potential trade deal between India and the United States, as well as consistent outflows of foreign funds from Indian markets.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, commented on the situation, stating that the US-India trade deal seems distant. He noted that the uncertainty surrounding the deal has negatively impacted the rupee's recovery, with consistent dollar buying putting downward pressure on the currency.

Bhansali added that even a reduction in India's trade deficit failed to bolster the rupee, as Foreign Institutional Investor (FII) outflows continued to exert pressure.

Government data released on Monday revealed that India's trade deficit narrowed to a five-month low of $24.53 billion in November. This was driven by a rebound in exports, which rose 19.37% to a six-month high of $38.13 billion, following a contraction in October. The increase in exports was primarily due to higher shipments of engineering and electronics goods. Simultaneously, imports decreased by 1.88% to $62.66 billion, attributed to lower inbound shipments of gold, crude oil, coal, and coke.

According to exchange data, FIIs sold equities worth ₹1,468.32 crore on Monday.

In related economic news, wholesale price inflation remained negative for the second consecutive month in November, registering at (-) 0.32%. That said, the reality is a bit more complicated. government data also indicated an increase in the prices of food articles such as pulses and vegetables on a month-on-month basis. The Wholesale Price Index (WPI)-based inflation was at (-) 1.21% in October and 2.16% in November of the previous year.

Globally, the dollar index, which measures the dollar's strength against a basket of six currencies, was trading slightly lower at 98.27, down 0.03%. Brent crude, the global oil benchmark, was also trading lower at $60.19 per barrel, a decrease of 0.61% in futures trade.

In the domestic equity market, the 30-share Sensex fell by 363.92 points to 84,849.44 in early trading, while the Nifty was down by 106.65 points to 25,920.65.