Indian rupee hits record low, crosses ₹90/dollar for first time
What's the story
The Indian rupee has hit a new low, breaching the ₹90 mark against the US dollar for the first time in history. The fall was witnessed during early trade on Wednesday and is attributed to factors such as foreign portfolio outflows and uncertainty over India-US trade talks. The Reserve Bank of India (RBI) is said to have intervened to stabilize volatility but couldn't manage a major recovery throughout the day.
Market conditions
Factors contributing to rupee's depreciation
The rupee's fall comes as global investors have been pulling money out of Indian markets and the dollar has been strengthening against major currencies. Weak foreign portfolio flows, uncertainty over US-India trade discussions, and a global risk environment favoring the dollar are some of the factors that have left the rupee vulnerable. Traders were expecting this fall but were taken aback by its rapid pace.
Economic repercussions
Impact of weaker rupee on economy
The depreciation of the rupee has immediate effects on households and businesses, as import bills for crude oil, electronics, and industrial goods increase. Companies with foreign loans face higher repayment costs. While exporters may benefit from a weaker currency, the overall economic pressure increases. Analysts predict that unless foreign flows stabilize or global conditions improve, the currency will continue to be volatile in the near future.
Central bank intervention
Market awaits RBI's response to rupee's depreciation
Market participants are closely watching if the RBI will defend the ₹90 mark more aggressively in the coming days. The breach of this psychological level indicates that pressure on the rupee is far from over. Amit Pabari, MD at CR Forex Advisors, said USD/INR is likely to trade between 88.90 and 90.20 with strong support at 88.80-89.00 band. Anil Bhansali of Finrex Treasury Advisors warned if RBI support eases at ₹90, we could see ₹91 also in this cycle.