Indian Rupee Hits Fresh Record Low Amid Uncertainty Over US-India Trade Deal

The Indian rupee on Monday continued its slump, hitting a fresh record low of 90.56 against the US dollar , down 0.1% on the day. The local currency opened at a record low of 90.45 against the dollar, down 0.1% from Friday’s historic-low close of 90.42. On Friday, the rupee had touched a historic low of 90.55 against the dollar in early Asian trade. The Indian currency has been one of the worst-performing Asian currencies, having fallen nearly 5.6% year-to-date. Markets are awaiting clarity on a trade deal between India and the US. Analysts have warned that the rupee could breach the 91-per-dollar level this month if the deal is not finalised. “A major drag on the market continues to be the elusive US-India trade deal, which is impacting India’s exports to the US, widening the trade deficit and contributing to the continuous depreciation of the rupee,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments. A widening trade deficit, along with limited dollar inflows into the Indian economy, has added to downward pressure on the currency. According to a Reuters report, the rupee’s depreciation has encouraged importers to step up hedging activity, while exporters remain reluctant to add dollar supply. As per media reports, the Reserve Bank of India (RBI ) has stepped in to prevent steeper losses in the rupee. However, its intervention has been mild, and the central bank is not targeting any specific level for the currency. “USD-INR is under pressure from continued FPI outflows across both bonds and equities. With global yields climbing, Indian bonds are facing stress from the unwinding of USD and JPY carry trades,” said Anindya Banerjee, Head of Currency and Commodity at Kotak Securities. As per provisional data for December 12 available on the NSE, foreign institutional investors (FIIs) were net sellers of equities worth Rs 1,114 crore, while domestic institutional investors (DIIs) were net buyers worth Rs 3,868 crore. “There are incremental positives around the India–US trade deal that could provide intermittent relief to the rupee. Overall, we expect a broad trading range of 89.50–91.00 on spot,” Banerjee added. Market focus will also be on the widely expected rate cut by the Bank of Japan, as investors await a quarter-point reduction by the central bank, which could have implications for the Indian currency.