Rupee records another low, nearing 91 over FPI outflow, US trade deal uncertainty

NEW DELHI: About a fortnight after breaching the 90 mark, the Indian Rupee is inching towards 91, hitting a fresh all-time low. At the time of filing this report, the Rupee was trading at 90.904 per US dollar, with an intraday high of 90.957, just shy of 91. So far this year, the Indian currency has depreciated by over 5 per cent on a cumulative basis.

Anindya Banerjee, Head Currency and Commodity, Kotak Securities, said, “USDINR is under pressure from continued FPI outflows across both bonds and equities.” “There are, however, incremental positives around the India-US trade deal, which could provide intermittent relief to the rupee. Overall, we expect a broad trading range of 89.50-91.00 on spot”, Banerjee added.

Manoj Kumar Jain, director and head of currency research, Prithvi Finmart, also echoed that the Rupee extended its fall due to heavy FPI outflow from the domestic equity markets. “Record trade deficits and fresh trade tariff of 50 per cent on Indian goods imposed by Mexico is also a reason for fresh fall in the rupee. A rupee slipped to record lower levels against major global currencies. However, weakness in the dollar index and US-India trade deal optimism could support rupee at lower levels”.

“We expect a rupee to remain volatile this week amid volatility in the dollar index, volatility in the domestic equity markets and ahead of the key U.S. and Chinese economic data and a pair could trade in the range of 89.6500-91.4000 this week”, Jain added.

Among other factors, Rupee depreciation has driven up Indian gold prices, which have risen 60 per cent this year. According to Akshat Garg, Head of Research and Product at Choice Wealth, the Rupee reflects growing pressure on the currency amid a mix of global uncertainty and India-specific capital-flow challenges.

“Foreign portfolio investors have continued to pare exposure to Indian equities and debt, leading to steady dollar outflows. At the same time, importers are actively buying dollars, while exporters are holding back conversions in anticipation of further rupee weakness, creating a clear demand-supply imbalance. Despite the US dollar softening globally, the rupee has remained under pressure due to these domestic flow dynamics”, Garg noted.

“Market participants also remain cautious amid lingering uncertainty around India-US trade discussions and broader geopolitical risks. The Reserve Bank of India has been present in the market to smooth volatility, but it is allowing the currency to adjust gradually rather than defend any specific level”. In the near term, Garg added that the Rupee is expected to remain volatile, with movements driven more by flows and sentiment than fundamentals. (ANI)