The Rupee is taking a hit again, setting a new all-time low against the US Dollar in early trade on Monday. That happened, and the currency market is definitely showing signs of nervousness.
The Rupee depreciated by 9 paise to hit an all-time intraday low of 90.58 against the Dollar. This follows the previous record on Friday, when it closed at 90.49. This continuous slide is putting the currency in a difficult spot.
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The Cause: Uncertainty and Outflows
The weakening Rupee is being driven by two major factors, which is often the case:
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Trade Deal Uncertainty: Investors are hanging back, waiting for clarity on the elusive India-US trade deal. The lack of a finalized agreement creates a huge drag, impacting India’s exports and widening the trade deficit. The Commerce Secretary did say India and the US are “very close” on a framework deal, but until it’s actually done, the market stays skeptical.
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Foreign Fund Outflows (FII Selling): Foreign Institutional Investors are still in sell mode. They sold equities worth ₹1,114.22 crore on Friday alone. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, pointed out that FPIs are selling across both equity and debt markets. This capital flight puts direct downward pressure on the currency.
The technical bias for the USD-INR pair remains bullish, meaning the Rupee is expected to slide further. Analysts are even pointing to a possible crossover of the 91 level toward 92 if the trade deal isn’t finalized soon.
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Market Snapshot
The pressure on the Rupee is coinciding with weakness in the domestic equity markets, although the Dollar Index itself is marginally lower.
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Sensex: Trading 298.86 points lower at 84,968.80.
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Nifty: Down 121.40 points at 25,925.55.
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Crude Oil: Brent crude is trading higher, which is bad news for India since it imports the vast majority of its oil. It was up 0.52\% at 61.44 per barrel.
The Reserve Bank of India (RBI) is reportedly intervening to control “excessive volatility,” but experts say they have been allowing the market to determine the price recently, showing a less forceful approach than in previous declines. The thing is, this steady depreciation is making the Rupee the worst-performing Asian currency this year.
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