The rupee on Wednesday breached the crucially important 90/$ level mark, declining to its lowest level in history against the US dollar. The currency fell for a sixth straight session, opening at 89.97, down 0.1% from Tuesday’s close of 89.87. Yesterday, the currency had already touched the 90-per-dollar level in the inter-bank order matching system.
The 90-per-dollar level was the immediate resistance for the rupee. Some analysts now expect that the rupee may even breach the 91-per-dollar mark. The depreciation in the currency has largely been attributed to the stalled trade deal between the US and India and the outflow of equities from the markets.
Why is the rupee sliding- Key concern
There are several factors that led to the rupee’s decline-
Speaking on the currency depreciation, Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said, “A real concern now, which has contributed to the slow drifting down of the market, is the continued depreciation in the rupee and fears of further depreciation since the RBI is not intervening to support the rupee. This concern is forcing FIIs to sell despite improving fundamentals, including rising corporate earnings and a strong rebound in GDP growth.”
“The rupee’s depreciation will halt and even reverse when the India–US trade deal materialises. This is likely this month. A lot, however, will depend on the details of the tariffs to be imposed on India as part of the deal,” he added.
RBI MPC kick starts
Meanwhile, the crucial RBI MPC meeting kick starts today at 10 am. The RBI is expected to address the issue of the weakening currency, as the rupee has recently been one of the worst-performing Asian currencies. Economists are split on the question of a rate cut going forward. However, given the rupee’s continuous decline and strong GDP numbers, the tables may turn.