The Indian rupee hit a new record low of 89.92 against the US dollar on Monday, surpassing the previous all-time low of 89.7575 recorded on December 1. The currency fell 0.3% on the day, highlighting growing pressures despite India’s strong GDP performance.
The rupee’s slide accelerated after it breached the 89.5 level, which the Reserve Bank of India (RBI) had previously defended. Analysts say this triggered stop-loss orders and increased dollar buying from importers, adding to the depreciation.
Market Reactions and Investor Concerns
Indian equities reacted to the rupee’s weakness, trading 0.5% lower, while foreign institutional investors (FIIs) showed caution. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted, “The continuing weakness in the rupee is a dampener impacting FII flows. A fair trade deal between India and the US could stem the weakness, but the deal has been delayed for too long.”
Trade and Current Account Deficit Pressures
Economists warn that India’s ballooning trade deficit will widen the current account deficit (CAD) in the current fiscal year. HSBC projects the CAD to rise to 1.4% of GDP, up from 0.6% last year, putting additional pressure on the currency.
RBI Intervention and Future Outlook
Analysts say the 90 mark is a key psychological level for the rupee. Anindya Banerjee, Head of Research – Currency, Commodity, and Interest Rate Derivatives at Kotak Securities, said, “We expect the RBI to continue intervening as the rupee approaches 90. Support lies around 88.80–89, while a sustained move above 90 could take the rupee toward 91.5.”
Trade Deal Uncertainty
Ongoing uncertainties regarding a US-India trade deal continue to affect market sentiment. Jateen Trivedi, VP Research Analyst at LKP Securities, explained, “Markets need a final, concrete agreement for the rupee to find meaningful support. The lack of notable intervention in November allowed the rupee to drift weaker. The expected range remains between 89.35–89.90 in the coming sessions.”
Conclusion
The rupee’s recent decline reflects structural pressures, including widening trade deficits and external uncertainties. While RBI intervention may offer temporary support, sustained relief likely depends on progress in trade negotiations with the US and other macroeconomic measures.