The Indian rupee plunged to a historic low on Tuesday, breaching the psychologically significant 91 level against the US dollar for the first time ever. This marked a continuation of the currency's recent losing streak, driven by persistent foreign institutional investor (FII) selling and ongoing global trade-related uncertainties.
A Steep and Sustained Decline
The domestic currency has been under intense pressure, weakening from the 90-per-dollar mark to over 91 in just the last ten trading sessions. In the past five sessions alone, it has lost almost 1% of its value against the greenback. At 11:38 AM on Tuesday, the rupee was trading at 91.075 against the USD.
The day's decline began with the rupee opening weak at 90.79 and quickly touching a then-record low of 90.83. This pressure followed a sharp sell-off in the previous session, where the currency had hit an intra-day low of 90.80 before settling at a record closing level of 90.78. On Monday, the rupee had shed 29 paise, extending its recent run of losses.
Analysts React: Why the Unexpected Fall?
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, expressed surprise at the sharp slump, noting that positive November trade data should have provided some support. "Further sharp weakness in rupee was not expected today since the November trade data has come better-than-expected," he told TOI.
He attributed the day's move to possible covering of short positions and highlighted the vicious cycle of sustained FII selling. Vijayakumar also explained the Reserve Bank of India's (RBI) apparent stance, stating, "Normally when rupee declines, the RBI intervenes by selling dollars to stem the decline. However, RBI's policy has been to let the currency decline."
He pointed to India's low inflation rate—0.71% in November—as a key reason for the central bank's non-intervention, suggesting that rupee depreciation is not currently hurting the economy. He also viewed the narrowing of India’s November trade deficit to $24.53 billion from $41.68 billion in October as a positive factor for the currency.
Outlook Remains Under Pressure
Market experts believe the rupee's woes are not over yet. Dilip Parmar, Research Analyst at HDFC Securities, noted that the rupee has become the worst performer among Asian currencies, unable to find support despite better trade numbers.
Echoing the cautious sentiment, Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, said the rupee is likely to stay under pressure in the near term. "The rupee is expected to trade with a negative bias amid delay in Indo-US trade deal and FII outflows," he stated. He added that a weak dollar or any intervention by the RBI could offer support at lower levels, expecting the USD-INR spot price to trade in a range of Rs 90.30 to Rs 91.
This latest record fall comes after the rupee had declined 17 paise last Friday to close at 90.49, which was its lowest-ever level at that time.
