The rupee declined to a record low at 84.93 per US Dollar (USD) in intraday trading in the forex market so far on Tuesday, weighted down by a widening trade deficit and a strengthening USD.
The rupee, which is currently trading at 84.9250 per USD, had closed at an all-time low on Monday at 84.8625 per USD, down about 8 paise against the previous close of 84.7875.
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.
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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.
“The prospect of further yuan/CNH weakness and high UST yields have also kept the rupee under pressure. Allowing the currency to depreciate will help rein in the import bill, albeit the authorities might prefer to keep resultant volatility in check.
“In the interim, 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 three months and 12 months horizon, beyond 86/dollar,” she said.
