The rupee weakened sharply on Tuesday, breaching the 91-per-dollar level for the first time in intraday trade, pressured by sustained foreign institutional investor (FII) outflows and uncertainty over an India–US trade agreement.
The local currency has fallen from around 90 to 91 against the dollar over the past 10 trading sessions and has lost about 1 per cent in just the last five sessions. Forex traders warned that the rupee could slide further and may even cross the 92-mark later this month.
At 11.45 am, the rupee was trading at 91.14 against the US dollar, down 36 paise from its previous close. It opened at 90.87 at the interbank foreign exchange and continued to weaken as the session progressed.
On Monday, the rupee had already settled at a fresh all-time low of 90.78 against the dollar, marking a decline of 29 paise.
“With the India–US trade deal unlikely in the near term, as the US wants agriculture included and India is firmly opposed, the rupee has crossed 91 and could even touch 92 this month,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
He attributed the currency’s fall to multiple factors, including buy-sell swaps, rupee liquidity shortages due to tax outflows, oil-related demand, speculative activity, exporters holding on to dollars, FII outflows and debt selling. Bhansali added that even a reduction in the trade deficit failed to support the rupee.
According to exchange data, FIIs sold equities worth Rs 1,468.32 crore on Monday.
On the macroeconomic front, wholesale price inflation remained in negative territory for the second consecutive month in November at (-) 0.32 per cent, government data showed. WPI inflation was (-) 1.21 per cent in October, compared with 2.16 per cent in November last year, despite a month-on-month rise in prices of food items such as pulses and vegetables.
In global markets, the dollar index, which measures the US currency against a basket of six major currencies, was down 0.03 per cent at 98.27. Brent crude prices slipped 0.61 per cent to USD 60.19 per barrel in futures trade.
Domestic equity markets were also under pressure, with the Sensex falling 363.92 points to 84,849.44 in early trade, while the Nifty declined 106.65 points to 25,920.65.