There is a continuous decline in the rupee. On Friday also, the rupee closed at another historic low of 90.41 against the US dollar, which is the second record low. The domestic currency had hit a historic low of 90.55 against the US dollar in early trade, mainly due to the delay in the trade agreement with the US.
Talking about the figures, the Indian Rupee opened at a historic low of 90.31 against the US Dollar. The rupee further weakened during the trading session and touched a new low of 90.55. A slight improvement was seen in the rupee in the afternoon session and reached 90.37. By the time the market closed, the rupee closed at a new historic low of 90.41.
These are the three enemies of the rupee
Delay in trade deal with America
Although Indian Prime Minister Narendra Modi and US President Donald Trump recently talked about bilateral cooperation, there was no concrete indication of any relief on tariffs. Experts say that the rupee has been under pressure since the imposition of tariffs by America and its effect will be visible by the end of the year. The markets are waiting for the last date of the trade agreement with America. Analysts say that the strength of the rupee will now depend on when the Indian government announces the final trade agreement with the US.
Profit booking by foreign investors
Due to continuous selling of domestic shares by foreign investors, pressure on the domestic currency is increasing. According to a Reuters report, foreign investors have withdrawn shares worth $18 billion from the Indian stock market this year. If we talk about the current month, we have sold about Rs 18 thousand crores. December is the 8th month of the current year when foreign investors are selling. Only four months were seen when investors put money into the stock market. Whereas in 10 out of the last 15 months, foreign investors have withdrawn their money from the stock market. During this period, the rupee has fallen by about 8 percent against the dollar.
Dollars are being bought heavily
Local companies have been buying dollars heavily to meet their year-end payments, further weakening the currency. Traders say that the RBI has intervened, but the central bank has not set any specific target level for the currency. By the way, on December 16, RBI is buying dollars from banks under currency swapping and giving several thousand crore rupees to the banking system. Due to which the rupee may get minor support. But this support may remain limited.
How can the future of rupee be?
Speaking on the rupee, Anindya Banerjee, Head of Currency and Commodity, Kotak Securities, said USDINR remains under pressure due to continued foreign investment fund (FPI) outflows in both bonds and equities. Indian bonds are under increasing pressure from the unwinding of carry trades in USD and JPY, along with a rise in global yields. However, there are some positive aspects regarding the India-US trade agreement, which may provide intermittent relief to the rupee. The analyst further said that overall, we expect a broad trading range of 89.50-91.00 on the spot.
