Rupee breaches 91 mark against US dollar; govt cites trade gap, delay in India-US deal for decline

Mumbai, Dec 16 (PTI) The rupee sank to a fresh record low, breaching the 91-a-dollar mark for the first time on Tuesday, even as the government attributed the currency's slide to the widening trade gap and developments related to the India-US trade deal.

During the session, the local unit tanked below 91 and hit its lowest level of 91.14 against the US dollar. However, it recouped some of the losses towards the end of the session, settling at 90.93, down 15 paise from its previous close.

The Indian currency has logged a steep fall from 90-a-dollar level to 91 in the last 10 trading sessions. In the past five sessions alone, the unit has slipped 1 per cent against the greenback.

The issue of the rupee's decline came up in the Rajya Sabha on Tuesday.

Minister of State for Finance Pankaj Chaudhary said, "During the current financial year, the depreciation of the INR has been influenced by the increase in trade deficit and likely prospects arising from the ongoing developments in India's trade agreement with the US, amid relatively weak support from the capital account." "The depreciation of currency is likely to enhance export competitiveness, which in turn impacts the economy positively. On the other hand, depreciation may raise the prices of imported goods. However, the overall impact of exchange rate depreciation on domestic prices depends on the extent of the pass-through of international commodity prices to the domestic market," he said.

Citing data of the past 10 years since 2015, Chaudhary said that this year the rupee has declined 5.1 per cent till December 3.

The rupee weakened 4.5 per cent against the US dollar in 2015, depreciated 2.6 per cent in 2016, while there was a 6.4 per cent rise in 2017, the data showed.

Since 2018, there has been a constant fall in the value of the rupee, declining 8.5 per cent in 2018, 2.3 per cent in 2019, 2.3 per cent in 2020, 1.7 per cent in 2021, 10.2 per cent in 2022, 0.6 per cent in 2023, and 2.8 per cent in 2024, the data shared by the Union minister showed.

"The value of the INR is market-determined, with no target or specific level or band. The Reserve Bank of India (RBI) regularly monitors the foreign exchange market and intervenes in situations of excess volatility. Further, the RBI monitors key developments across the globe which may have an impact on USD-rupee exchange rate," the minister said.

According to forex analysts, the rupee might even cross the 92 per dollar-mark this month.

"Rupee made a new lifetime low as dollar buying continued with news that (US President) Donald Trump has not agreed to the new trade proposals from India. So the deal goes into limbo till a new one is finalised," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

"FPIs will continue to sell while speculators will continue to take USD/INR up in the absence of RBI intervention... 92 looks imminent unless RBI has other ideas or a deal is finalised," he said, adding that the range for tomorrow is expected at 90.75 to 91.25.

Axis Bank chief economist Neelkanth Mishra said the rupee is likely to depreciate further but there is no need to panic over the movements in the domestic currency. He projected that the currency would depreciate more to be at Rs 92-94 to a dollar by June 2027.

Foreign institutional investors sold equities worth Rs 2,381.92 crore on Tuesday, according to exchange data.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.08 per cent lower at 98.23.

Brent crude, the global oil benchmark, was trading 1.78 per cent lower at USD 59.48 per barrel in futures trade.

On the domestic equity market front, the 30-share benchmark index, Sensex, tanked 533.50 points to settle at 84,679.86, while the Nifty was down 167.20 points to 25,860.10.

According to the latest government data released on Monday, India's trade deficit narrowed to a five-month low of USD 24.53 billion in November, as exports rebounded by 19.37 per cent to a six-month high of USD 38.13 billion after contracting in October, driven by higher shipments of engineering and electronics goods.

At the same time, the country's imports dipped by 1.88 per cent to USD 62.66 billion due to a fall in the inbound shipments of gold, crude oil, coal, and coke.

Also, wholesale price inflation stayed in the negative for the second consecutive month in November at (-) 0.32 per cent, even though there was an uptick in prices of food articles like pulses and vegetables on a month-on-month basis, government data showed on Monday.

Wholesale Price Index (WPI)-based inflation was at (-) 1.21 per cent in October and 2.16 per cent in November last year. PTI TRB CS MR MR