The rupee on Tuesday slid 23 paise against the US dollar to close at a fresh all-time low of 91.01, weighed down by uncertainty around the India–US trade deal, sustained foreign portfolio investor (FPI) outflows and global risk aversion.
During the session, the domestic currency touched an intra-day record low of 91.14, falling 36 paise from the previous close, before recovering marginally in late trade. The decline came despite a sharp fall in global crude oil prices.
In the Rajya Sabha, the government attributed the weakness to developments related to the India–US trade agreement, while maintaining that depreciation is expected to aid export competitiveness despite higher import costs.
Over the last 10 trading sessions, the rupee has slipped from the 90-per-dollar level to 91. In the past five sessions alone, it has depreciated about 1 per cent against the greenback.
“During the current financial year, the depreciation of the INR has been influenced by an expanding trade deficit and prospects arising from developments in India’s trade agreement with the US, amid relatively weak support from the capital account,” minister of state for finance Pankaj Chaudhary said.
Export boost
The government reiterated that currency depreciation can support economic activity by boosting exports, though it may also raise import prices. The impact on domestic inflation, Chaudhary said, depends on the extent of pass-through from global commodity prices.
India’s exports rebounded 19.37 per cent in November to a six-month high of $38.13 billion after contracting in October, led by engineering and electronics goods. The trade deficit narrowed to a five-month low of $24.53 billion. Imports fell 1.88 per cent to $62.66 billion due to lower shipments of gold, crude oil, coal and coke.
However, think tank GTRI questioned the benefits of a weaker currency. Ajay Srivastava of GTRI said that despite nearly 50 per cent depreciation since 2013, export growth has been modest, constrained by high input tariffs, rigid standards, quality control orders, supply-chain bottlenecks, costly logistics and dependence on imported intermediates.
Market participants warned that further weakness could not be ruled out. Anindya Banerjee of Kotak Securities said a sustained fall could open the path towards the 92 level, citing trade-war uncertainty, nearly $2.7 billion of FPI outflows in early December and rising US bond yields.
Banerjee said the RBI’s limited intervention appears deliberate, while Neelkanth Mishra of Axis Bank expects a “mild but not wild” depreciation, noting that heavy intervention in late 2024 depleted reserves and forced the rupee past 90.
