Rupee Breaches 91 Mark Amid FII Outflows and Trade Uncertainty

The Indian rupee weakened 36 paise to trade at 91.14 against the US dollar, breaching the 91-mark for the first time in intra-day trade on Tuesday. Persistent foreign institutional investor (FII) outflows and uncertainty over the India-US trade deal weighed on the local currency.

The rupee has depreciated from 90 to 91 in the past 10 trading sessions, marking a 1% decline in just the last five sessions. At the interbank forex, it opened at 90.87 and continued losing ground as the session progressed. On Monday, the rupee had settled at a record low of 90.78, down 29 paise from the previous close.

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Market Drivers

Trade Deal Uncertainty:
Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, said, “The US-India trade deal still seems off by a distance. Statements on the first phase being signed before year-end have been inconsistent, creating uncertainty in the USD/INR pair and driving consistent dollar buying.”

Foreign Outflows:
FIIs sold equities worth ₹1,468.32 crore on Monday, maintaining pressure on the currency despite a reduction in India’s trade deficit.

Inflation and Commodities:
Wholesale price inflation remained negative for the second consecutive month at -0.32% in November, compared with -1.21% in October. Prices of food items, including pulses and vegetables, saw a modest month-on-month increase. Brent crude traded 0.61% lower at $60.19 per barrel, while the dollar index was slightly down at 98.27.

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Domestic Market Impact

Equity markets mirrored the cautious sentiment: the Sensex fell 363.92 points to 84,849.44, while the Nifty dropped 106.65 points to 25,920.65 in early trade.

Analysts said that unless clarity emerges on the trade deal and FII selling slows, the rupee may continue to face downward pressure against the US dollar.