Indian rupee hits record low of 89.76 against US dollar
What's the story
The Indian rupee has hit a new all-time low against the US dollar, hitting 89.76 in today's market session. This is a decline from its previous low of 89.49 set about two weeks ago. The depreciation comes despite India's stellar Q2 GDP growth rate of 8.2% year-on-year for July-September, which had pushed equities to record highs and nudged bond yields higher on Monday.
Market trends
Foreign investors' outflows and bond yield rise
Foreign investors sold about $400 million worth of Indian equities on Friday, pushing year-to-date outflows past $16 billion. Meanwhile, the 10-year government bond yield rose to 6.553%, close to a one-week high. The maturity of large positions in the non-deliverable forwards market also weighed on the rupee on Monday, as per Reuters. The country's merchandise trade deficit also hit an all-time high in October.
Trade implications
US-India trade deal uncertainty impacts rupee
The uncertainty over a US-India trade deal has also impacted the rupee's value. Despite earlier hopes of a reduction in steep 50% tariffs on Indian exports, no concrete agreement has been reached yet. These tariffs have hurt trade and portfolio flows into equities, making the currency dependent on central bank interventions for support.