Shock Alert: Rupee Slips Past 90 Against the Dollar – Traders and Investors, Brace Yourselves

Rupee Slides Past 90 Against The Dollar

The decline of the Indian rupee goes beyond just the number as it has already crossed the 90-per-dollar barrier. The eight-month-long devaluation is still on, and traders, importers, and regular people are all very anxious. The dollar outflow for trade and investments, together with companies’ rush to hedge against further weakness, are the main reasons that the currency is under pressure.

Rupee feels the pinch as every dip causes a domino effect: importers race for dollars, exporters hold back, and the rupee is left to suffer. HSBC economists are calling it a “shock absorber” for high tariffs, but even shock absorbers cannot protect the economy entirely.

With tariffs, trade disputes, and global market dynamics in the picture, the rupee’s fall is a vivid representation of the external forces that affect India’s economy in real time through the ripple effect of imports to investor sentiment.

RBI Interventions: Can the Rupee Catch A Break?

So, if you’re watching the rupee slide again, and the Reserve Bank of India is jumping in to slow the fall, but the pressure is not letting up. Every time you think the rupee might catch a breather, persistent dollar demand keeps it on a downhill ride.

What is the RBI’s toolkit?

Shrinking foreign exchange reserves and boosting short U.S. dollar positions in the FX forward market, now hitting a 5-month high of $63.4 billion. 

Rupee Under Pressure: Year-to-Date Performance, Outflows, and Market Challenges

Q1: How has the rupee performed year-to-date?
A1: The rupee is one of Asia’s worst performers, down 5% against the dollar so far this year. Its decline from 85 to 90 occurred in less than a year, faster than the previous fall from 80 to 85.

Q2: What role have portfolio and foreign investment outflows played?
A2: Heavy foreign investor net selling, totaling nearly $17 billion, has pressured the rupee. A slowdown in foreign direct investment (FDI) has added further strain.

Q3: How do gross investment flows compare to net outflows?
A3: India attracted gross inflows of $6.6 billion in September, but large IPO exits and repatriation caused net outflows. Net FDI turned negative for the second consecutive month, according to the RBI.

Q4: How have trade deficits and tariffs impacted the rupee?
A4: Steep U.S. tariffs of up to 50% on Indian goods and a surge in gold imports pushed the merchandise trade deficit to an all-time high in October.

Q5: What is the effect of dollar demand on currency pressure?
A5: Domestic firms’ overseas borrowings and NRIs’ deposits have slowed dollar inflows. Each rupee slide, including the break of 90, triggered fresh dollar demand, while exporters held back sales, leaving the rupee vulnerable.

(With Inputs From Reuters)

Also Read: Stock Market Today: Nifty at 26,037, Sensex at 85,193 – Global Cues Spur Early Gains