Rupee Hits New Low: Plunges to 90.83 Against US Dollar

The Indian rupee's downward trend continued Tuesday, reaching a new low of 90.83 against the US dollar during the day's trading. This decline occurred despite recent improvements in India's trade deficit. The rupee's weakness is attributed to persistent outflows of foreign funds and ongoing uncertainties surrounding trade. Experts predict that the rupee will likely remain under pressure in the short term, influenced by delays in a potential trade agreement and continued foreign institutional investor (FII) outflows.

Trading began with the rupee already weak, opening at 90.79, a 0.1% decrease from Monday's closing value of 90.73. The previous session saw a significant sell-off, with the rupee hitting an intra-day low of 90.80 before settling at a record closing low of 90.78. Monday alone saw the rupee lose 29 paise, adding to its recent losses.

Forex traders suggest that risk aversion in the market and strong demand for dollars from importers are contributing factors to the rupee's weakness. Concerns about the timing and potential outcome of a trade deal between India and the US have also increased.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, offered a slightly more optimistic view, stating that the rupee is likely to stabilize. He noted the decrease in the November trade deficit to $24.53 billion from $41.64 billion in October, which he believes will reduce the pressure on FIIs to sell due to anticipated depreciation.

Dilip Parmar, Research Analyst at HDFC Securities, pointed out that the rupee's recent performance makes it the worst-performing Asian currency, despite better-than-expected trade balance figures. Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, anticipates continued pressure on the rupee in the near future, citing delays in the Indo-US trade deal and ongoing FII outflows. Choudhary also suggested that a weak dollar and potential intervention by the Reserve Bank of India (RBI) could offer some support to the rupee. He expects the USD-INR spot price to fluctuate between 90.30 and 91.