Rupee Declines to Record Low of 90.74 Against Dollar Amid Trade Deal Uncertainty and FII Outflows
The Indian rupee has hit a new record low, closing at 90.74 against the US dollar on Monday. This decline follows a drop to 90.80 during intra-day trading, driven by ongoing uncertainties surrounding trade negotiations between India and the US, as well as continued outflows of foreign funds. Market analysts indicate that strong demand for dollars from importers and a risk-averse sentiment among investors have contributed to the rupee’s struggles.
Rupee’s Performance and Market Sentiment
The rupee opened at 90.53 per dollar in the interbank foreign exchange market but faced pressure throughout the trading session. It ultimately settled at 90.74, down 25 paise from its previous close. This decline follows a 17 paise drop on Friday, when the rupee had already reached a then-record low of 90.49. Forex traders noted that despite some positive macroeconomic indicators, the domestic currency struggled to gain traction. Concerns over capital outflows and trade negotiations have overshadowed any potential support for the rupee. According to Dilip Parmar, a research analyst at HDFC Securities, the rupee’s performance has positioned it as the weakest currency in Asia.
Factors Influencing the Currency’s Decline
Parmar highlighted that the rupee’s decline is largely due to a significant imbalance between demand and supply in the currency market. The persistent high demand for dollars from importers, coupled with ongoing capital outflows, remains a primary concern for the currency’s stability. He noted that the technical outlook for the USD-INR pair appears bullish in the near term, with resistance levels around 90.95 and support near 90.50. This technical analysis suggests that the rupee may continue to face challenges in the coming days.
Trade Negotiations and Economic Outlook
Trade negotiations between India and the US are also a focal point for market participants. Commerce Secretary Rajesh Agrawal stated that both countries are “very close” to finalizing a framework trade deal, although he did not provide a specific timeline. The discussions involve parallel negotiations on tariff-related issues and a comprehensive bilateral trade agreement. Exporters and industry bodies are closely monitoring these talks, as high import duties have negatively impacted Indian exports to the US. The outcome of these negotiations could have significant implications for the rupee’s future performance.
Market Reactions and Broader Economic Indicators
In the broader financial landscape, the dollar index, which measures the US dollar’s strength against a basket of six major currencies, saw a slight decrease of 0.08% to 98.32. Meanwhile, Brent crude futures, a global oil benchmark, rose by 0.21% to $61.25 per barrel. In the equity market, benchmark indices experienced a marginal decline, with the Sensex falling by 54.30 points to close at 85,213.36 and the Nifty dropping by 19.65 points to 26,027.30. Additionally, foreign institutional investors sold equities worth Rs 1,114.22 crore on Friday, further reflecting the cautious market sentiment. On a positive note, India’s foreign exchange reserves increased by $1.033 billion to reach $687.26 billion in the week ending December 5, following a decline in the previous week.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
