Rupee hits fresh record low, breaches 90-mark against US dollar for the first time

The Rupee's depreciation continued on Wednesday with the Indian currency touching a fresh record low.

The Rupee’s depreciation continued on Wednesday with the Indian currency touching a fresh record low. According to the news agency PTI report, the rupee fell 9 paise to a record low of 90.05 against the US dollar in early trade. The rupee has faced downward pressure, with the dollar–rupee exchange rate climbing over 1% in the past five trading sessions. Over the last month, it has surged more than 1.5%, extending its upward trend for the sixth consecutive month.

According to traders, the depreciation of the rupee has been caused by both policy intentions and market forces, as reported by NDTV. As per many market participants, the government and Reserve Bank of India (RBI) seem to be inclined towards supporting exporters, hence maintaining a strong demand for dollars for the past few days. On Tuesday, several banks owned by the government were consistently purchasing dollars at high prices, thus reinforcing the intention of support for exporting businesses. A deal was made for 90.0050 after market hours on a trading platform, NDTV reported.

The rupee is facing additional pressure due to stalled India–US trade talks and significant foreign portfolio investor (FPI) outflows, even as the dollar index struggles to stay above 100. If the Reserve Bank of India (RBI) begins to lose support around the 90 level, analysts predict that the exchange rate will probably approach a level of 91 within this current cycle.

At the interbank foreign exchange, the rupee opened at 89.96 against the greenback and slipped to a record intra-day low of 90.15 before recovering some ground to trade at 90.02, down 6 paise from its previous close.

On Tuesday, the rupee settled 43 paise down at an all-time closing low of 89.96 against the US dollar, largely owing to continued short-covering from speculators and sustained importer demand for the American currency. “The rupee has been weakening with the Government of India and the Reserve Bank of India (RBI) wanting to help exporters and may have kept the dollar well bid in the past few days,” Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

“Nationalised banks were buying dollars at higher levels consistently yesterday (Tuesday)… There was a deal at 90.0050 after the close of market hours on the trading platform. The stalled India-US trade talks and heavy FPI outflows are causing this fall in rupee despite a weakening dollar index,” he said.

Bhansali said the rupee might hit 91 levels in this cycle if the RBI support eases at 90. The MPC meeting starts on Wednesday and the interest rate decision will be declared on December 5 ahead of the Fed interest rate decision on December 10.

“A rate cut by the RBI could invite further selling of the rupee,” he added. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.13 per cent lower at 99.22. Brent crude, the global oil benchmark, was trading 0.03 per cent lower at USD 62.43 per barrel in futures trade.

(With agencies inputs)