The rupee sank to a record low on Wednesday, dropping beyond the 90-per-dollar level for the first time amid foreign money outflows, high crude oil prices and uncertainty about the India–US trade pact, according to PTI.
RBI Absence Pressures Rupee
The absence of noticeable RBI involvement during much of the afternoon contributed to market pressure, FX dealers said.
At the interbank foreign exchange, the currency began at 89.96 and plummeted to a new intraday low of 90.30 before settling at 90.21 (provisional), down 25 paise from its previous level.
On Tuesday, the rupee had finished 43 paise lower at 89.96, hurt by strong importer demand and speculative short covering. Due to pressure from foreign investors to sell and an increase in the price of crude oil, the rupee reached a new all-time low of 90.30.
Rupee Faces Trade Uncertainty
The rupee has also been impacted by uncertainty around the announcement of the India-US trade agreement. However, a weak US dollar index prevented a significant fall,” said Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, PTI cited him as saying.
He went on to say that despite forecasts of a US Federal Reserve rate decrease in December, the currency may continue to trade with a “slight negative bias” due to ongoing FII outflows and rising petroleum prices. Choudhary anticipates that the USD-INR spot price would stay between Rs 89.80 and Rs 90.50.
Anil Kumar Bhansali, Head of Treasury and Executive Director of Finrex Treasury Advisors LLP, said that the RBI “easily allowed the rupee to exceed 90, and it even plummeted to 90.30 before the RBI stepped in.”
Mixed Macro Market Signals
Macro indicators were mixed. Thanks to new business development, the seasonally adjusted HSBC India Services PMI Business Activity Index increased from 58.9 in October to 59.8 in November.
Brent oil futures fell 0.91% to USD 63.02 a barrel, while the dollar index dropped 0.20% to 99.16.
The Sensex fell 31.46 points to 85,106.81 and the Nifty fell 46.20 points to 25,986, both of which were muted equity benchmarks. Foreign Institutional Investors sold stocks worth Rs 3,642.30 crore on Tuesday, market data showed.
