The week ended for the Indian rupee with yet another historic low close of 90.41 against the US dollar, marking a second record low for the Indian currency. The domestic currency had hit a historic low of 90.55 against the greenback in the early trade sessions, largely attributed to delays in a trade deal with the US.
Here are the currency levels for Friday’s trading session:
- The Indian rupee opened at a historic low of 90.31 against the US dollar.
- The currency weakened further and hit a new low at 90.55.
- The currency saw a slight recovery in the afternoon session at 90.37.
- The Indian currency closed at a new historic low of 90.41, down 0.5% on the week.
The Indian rupee has been one of the worst-performing Asian currencies, having fallen by over 5% in the current fiscal, marking its worst performance in three years.
So what exactly is driving the currency?
The markets await a final date for a trade deal with the US. Analysts have warned that further delays in the trade deal could not just breach the 91-level mark but even weaken the currency to the 93 mark by the end of next year.
#1 Confusion over trade delay with US
While Indian Prime Minister Narendra Modi and US President Donald Trump spoke yesterday on bilateral cooperation, no firm indication of any tariff relief has been mentioned. Experts have said that the currency has been facing pressure ever since the imposition of tariffs by the US, and the effect is showing towards the end of the year.
The markets await a final date for a trade deal with the US. Analysts have said that the upward movement for the rupee now depends on when the Government of India will announce a final trade deal with the US
#2 Persistent outflow of FII
The persistent selling of domestic equities by foreign investors continues to add pressure to the domestic currency. As per a Reuters report, foreign investors have pulled out equities worth $18 billion from Indian equity market this year.
#3 Dollar purchases
Large purchases of the dollar are being made by local corporates to complete their year-end payments, which has further weakened the currency. Traders say that the RBI has intervened, but the central bank doesn’t hold any specific target level for the currency.
Outlook for Rupee
Speaking on the future prospects of the currency, Anindya Banerjee, Head of Currency and Commodity, Kotak Securities said, “USDINR is under pressure from continued FPI outflows across both bonds and equities. With global yields climbing, Indian bonds are facing stress from the unwinding of the USD and JPY carry trades.”
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, the analyst added.
