The Indian rupee breached the 90 mark against the US dollar for the first time. It fell to a new low of 90.14 against the US dollar today, slipping 28 paise. This happened from the previous close of 89.86, signalling renewed pressure on the currency.
The rupee has been falling because foreign investors are pulling money out of India, and there is still no trade deal between the US and India. These problems are affecting the rupee even though India’s economy is otherwise strong.
This has to be considered as the sixth straight session of fall for the Indian currency amid high demand for the dollar and a delay in the India-US trade deal.
Why the fall against the Dollar?
According to a Bloomberg report, India is still one of the few major economies without a trade agreement with the US, though officials say they are hopeful of finalising one soon. Meanwhile, the high 50% tariffs placed by the US on Indian goods are hurting exporters, and India’s strong import demand is keeping the need for dollars high, adding more pressure on the rupee. Together, these factors have contributed to the widening of India’s current-account deficit in the September quarter.
Market participants say skewed dollar flows are intensifying the rupee’s weakness. Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services, told Bloomberg News, “Exporters are not selling dollars aggressively since the rupee is depreciating, while the dollar demand from importers remains high.”
What could ease the pressure on the rupee?
The Bloomberg report quoted Barclays strategists, that a trade deal with Washington is likely to provide near-term respite to the rupee. The report also says that, with the key 90 mark breached, the currency could slip further to 90.30 in the coming days, HDFC Securities warned.
Quoting Kotak Securities Ltd., the report says the Reserve Bank of India may have to intervene more firmly to control speculative pressure on the rupee. The currency has slipped 4.9% this year, making it the weakest performer in Asia. This week’s decline comes even though official data released on Friday showed that India’s economy grew at its fastest pace in six quarters.
