Rupee vs Dollar: Indian Rupee Plunges to Historic Low, Crosses 91 Against US Dollar for First Time

The Indian currency market witnessed a tumultuous session on Tuesday as the Rupee plummeted to an unprecedented low against the US Dollar, while for the first time in history, the Indian Rupee breached the critical psychological level of 91 against the greenback, signaling a significant depreciation that has sent ripples through financial markets and raised concerns among economists and investors alike. During intraday trading, the Rupee was observed trading at 91. 14 per US Dollar, a notable drop of 36 paise from its previous close, indicating the severity of the market pressure.

Accelerated Depreciation Trend

The immediate catalysts for this sharp decline in the Rupee's value are primarily attributed to continuous profit-taking and capital withdrawals by Foreign Institutional Investors (FIIs) from Indian markets. This outflow of foreign capital exerts downward pressure on the local currency, while On top of that, the ongoing uncertainty and delays surrounding the proposed trade deal between India and the United States have exacerbated the Rupee's woes. Experts suggest that US President Donald Trump appears unwilling to proceed with a deal without addressing agricultural issues, a stance explicitly opposed by India, thereby dimming the prospects of an imminent agreement.

This prolonged uncertainty is a significant factor contributing to the Rupee's weakening trajectory. The pace of the Rupee's depreciation has been particularly alarming. According to market data, the Indian Rupee has moved from the 90 level. To the 91 level against the Dollar in a mere 10 trading days. The Rupee first crossed the 90 mark against the Dollar on November 2, and its downward slide has been relentless since then, while in the current year alone, the Rupee has depreciated by over 6. 42% against the Dollar, underscoring its vulnerability. In the last five trading sessions alone, the local currency has shed 1 percent of its value against the US Dollar, a clear indicator of the prevailing market anxiety.

Expert Outlook and Future Projections

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, expressed his concerns regarding the Rupee's fall. He stated that the US-India trade agreement is unlikely to materialize soon given Trump's insistence on agricultural issues and India's firm opposition. This impasse, he noted, has pushed the Rupee beyond 91, and he further. Predicted that it could even breach the 92 mark within the current month. Such a forecast suggests that the market may experience further volatility and depreciation in the near term, adding to the challenges faced by policymakers.

Broader Factors Contributing to Weakness

Bhansali also highlighted several other factors contributing to the Rupee's persistent weakness. These include fluctuations in buying and selling activity, a shortage of Rupees due to tax clearances, speculative oil purchases, the absence of a definitive trade agreement, dollar hoarding by exporters, and the withdrawal of funds by foreign investors, while On top of that, credit sales are also playing a role in the Rupee's decline. He pointed out that despite a reduction in the trade deficit on Monday, the local currency failed to show any signs of recovery, indicating that other powerful negative factors are currently dominating market sentiment and overriding any potential positive influences.

Impact on Economic Indicators

Alongside the Rupee's depreciation, other key economic indicators have also shown signs of instability. Exchange data revealed that foreign investors sold shares worth Rs 1,468. 32 crore on Monday, intensifying the capital outflow pressure, while wholesale Price Index (WPI) inflation remained negative at (-) 0. 32 percent in November for the second consecutive month, although prices of food items like pulses and vegetables saw month-on-month increases. Meanwhile, the Dollar Index, which measures the Dollar's strength against a.

Basket of six major currencies, was trading marginally lower by 0. 03 percent at 98. 27, while in the international market, Brent crude futures, a key benchmark for oil prices, fell by 0. 61 percent to 60. 19 US dollars per barrel, which would typically be a positive. For the Rupee, but its impact is currently overshadowed by other factors. Domestic stock markets weren't immune to the pressure, with the 30-share benchmark Sensex falling 363, while 92 points to 84,849. 44 in early trade, while the Nifty dropped 106. 65 points to 25,920. 65. This confluence of factors paints a challenging economic picture for India, demanding careful monitoring and strategic interventions.