Rupee marginally up at 84.90 amid economic concerns and weak market performance

The Rupee slumped to a fresh all-time low on Tuesday, weighted down by a widening trade deficit and strengthening USD.

The Indian unit (INR) closed at a record low of 84.8950 per US Dollar (USD), down about 3 paise vis-a-vis previous close of 84.8625. Intraday, INR, which opened at 84.92, had hit a fresh low of 84.93.

Forex traders said the rupee is likely to remain under pressure due to concerns over slowdown in the economy and dollar demand from importers and foreign banks.

The unit finally ended the session marginally higher by 1 paisa at 84.90 (provisional) against the dollar. On Monday, the rupee depreciated 11 paise to close at an all-time low of 84.91 against the US dollar.

India’s goods trade deficit widened to a record $37.84 billion in November 2024 vs October’s $27 billion as goods imports spiralled, largely due to unprecedented gold imports during the month.

Forex dealers said the RBI had intervened in the market (sold Dollars) to stabilise the currency.

V Rama Chandra Reddy, Head-Treasury, Karur Vysya Bank, observed that RBI still has the firepower to intervene in the market, given that it has assiduously built up forex reserves for a rainy day.

But, the Rupee has not depreciated as much as other Asian currencies, including the Chinese Yuan, have against USD in the last one-and-a-half months or so.

Asian currencies have depreciated after US President elect Donald Trump’s threat to raise tariffs on imports from BRICS countries if they float a common currency for trade.

Radhika Rao, Senior Economist & Executive Director, Group Research, DBS Bank, observed that market participants will continue to test the incoming Governor’s view on the currency, with the Rupee at record lows below 84.80 this week.

“Prospect of further yuan/CNH weakness and high UST yields have also kept the Rupee under pressure…There is also market chatter that the RBI’s NDF (non-deliverable forward) short position has close to halved from the earlier rumoured $60 billion.

“DBS FX strategist sees scope for further rupee slippage over the next 3 month and 12 month horizon, beyond 86/dollar,” she said.

On the domestic equity market front, the 30-share benchmark index Sensex closed lower by 1,064.12 points, or 1.30 per cent, at 80,684.45 points. The Nifty was down 332.25 points, or 1.35 per cent, to 24,336.00 points.

Foreign Institutional Investors (FIIs) offloaded Rs 278.70 crore in the capital markets on a net basis on Monday, according to exchange data.

(With inputs from PTI)