The Indian rupee has fallen for the fourth consecutive day. In early trade on Tuesday, it fell by 36 paise against the dollar and crossed the important level of 91 for the first time. The rupee slipped to a low of 91.14 during trading. In the last 10 trading sessions, the rupee has fallen from 90 to 91. Moreover, the rupee has fallen by more than 50% since the current government came to power in 2014.
Let us tell you that due to continuous selling by Foreign Portfolio Investors (FPIs) and uncertainty regarding the trade deal with America, there is pressure on the rupee. Earlier on Monday, the rupee had closed at a low of 90.78, which was a decline of 29 paise from its previous closing price. According to the report of Indian Express, the rupee had a weak start in the Interbank Foreign Exchange and it continued to slip during trading.
Selling by foreign investors
The surprising thing is that even good economic data is not able to support the rupee. Despite a major reduction in trade deficit on Monday, the rupee did not show any improvement as foreign institutional investors (FIIs) continued selling. Foreign investors have so far withdrawn about 19 billion dollars, of which a major part is from the stock market and some from the debt market. According to exchange data, foreign investors sold shares worth Rs 1,468.3 crore on Monday. At the same time, according to government data, wholesale inflation in November remained negative for the second consecutive month and was recorded at -0.32%, while there was a month-on-month increase in the prices of food items like pulses and vegetables. Wholesale inflation in October was -1.21%, whereas in November last year it was 2.16%.
Apart from this, the effect of continuous weakness of rupee is also visible on the stock market. Due to increasing concerns of investors, NSE Nifty 50 has fallen by about 1.7% from the near record level made in November. This decline is in danger of impacting the boom in India’s $5.2 trillion stock market, which had recently started to recover.
Indian Rupee will weaken by more than 5% against the dollar in 2025
The continuous weakness of the dollar is also not able to support the rupee. The dollar index, which shows the strength of the dollar against six major currencies, has fallen by 0.03% to 98.27. So far this year, the Indian rupee has weakened by more than 5% against the dollar. This makes it the third worst performing currency among the 31 major currencies of the world. More than rupee decline has been recorded only in Turkish Lira and Argentinian Peso. This decline has happened at a time when the dollar index itself has weakened by more than 7%.
Crossing the 91 level has special significance as it represents halving of the rupee value compared to 2011 levels. According to the Times of India report, analysts say that this has increased the pressure on RBI Governor Sanjay Malhotra, who will have to strike a balance between rupee flexibility and market stability.
How much more will the rupee fall?
In recent months, the Reserve Bank of India has intervened several times to stop the fall of the rupee, but after falling below the level of 88.80 and crossing 90 per dollar, the support of RBI seems weaker than before. According to media reports, until the situation regarding trade talks becomes clear and global risk appetite improves, the rupee may remain under pressure. In such a situation, investors can remain cautious till the end of the year.
