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Rupee Nears 91: How FPI Outflows and Trade Deal Fears Fuel Record Fall

The Indian rupee is sliding dangerously close to 91 against the US dollar, setting another record low. Experts point to continuous foreign investor money leaving the country as a major reason for the drop. While hope for a US-India trade deal offers some potential relief, market uncertainty is keeping the currency volatile. This weakness is also pushing up domestic gold prices, which have seen a significant rise this year.

Key Points: Indian Rupee Hits Record Low Near 91 Amid FPI Outflows

  • The rupee has depreciated over 5% this year, hitting a fresh low near 91 per dollar
  • Heavy foreign portfolio investor (FPI) outflows from equities and bonds are a primary pressure point
  • A record trade deficit and new Mexican tariffs on Indian goods contributed to the fresh fall
  • Analysts expect volatility with the rupee trading in a range of 89.65 to 91.40 this week
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Rupee records another low, nearing 91 over FPI outflow, US trade deal uncertainty

The Indian rupee hits a new all-time low, nearing 91 against the US dollar due to heavy FPI outflows and uncertainty around the India-US trade deal.

"USDINR is under pressure from continued FPI outflows across both bonds and equities. - Anindya Banerjee, Kotak Securities"

New Delhi, December 15

About a fortnight after breaching the 90 mark, the Indian Rupee is inching towards 91, hitting a fresh all-time low. At the time of filing this report, the Rupee was trading at 90.904 per US dollar, with an intraday high of 90.957, just shy of 91.

So far this year, the Indian currency has depreciated by over 5 per cent on a cumulative basis.

Anindya Banerjee, Head Currency and Commodity, Kotak Securities, said, "USDINR is under pressure from continued FPI outflows across both bonds and equities."

"There are, however, incremental positives around the India-US trade deal, which could provide intermittent relief to the rupee. Overall, we expect a broad trading range of 89.50-91.00 on spot," Banerjee added.

Manoj Kumar Jain, Director and Head of Currency Research, Prithvi Finmart, also echoed that the Rupee extended its fall due to heavy FPI outflow from the domestic equity markets.

"Record trade deficits and fresh trade tariff of 50% on Indian goods imposed by Mexico is also a reason for fresh fall in the rupee. A rupee slipped to record lower levels against major global currencies. However, weakness in the dollar index and US-India trade deal optimism could support rupee at lower levels. We expect a rupee to remain volatile this week amid volatility in the dollar index, volatility in the domestic equity markets and ahead of the key U.S. and Chinese economic data and a pair could trade in the range of 89.6500-91.4000 this week," Jain added.

Among other factors, Rupee depreciation has driven up Indian gold prices, which have risen 60 per cent this year.

According to Akshat Garg, Head of Research and Product at Choice Wealth, the Rupee reflects growing pressure on the currency amid a mix of global uncertainty and India-specific capital-flow challenges.

"Foreign portfolio investors have continued to pare exposure to Indian equities and debt, leading to steady dollar outflows. At the same time, importers are actively buying dollars, while exporters are holding back conversions in anticipation of further rupee weakness, creating a clear demand-supply imbalance. Despite the US dollar softening globally, the rupee has remained under pressure due to these domestic flow dynamics," Garg noted.

"Market participants also remain cautious amid lingering uncertainty around India-US trade discussions and broader geopolitical risks. The Reserve Bank of India has been present in the market to smooth volatility, but it is allowing the currency to adjust gradually rather than defend any specific level."

In the near term, Garg added that the Rupee is expected to remain volatile, with movements driven more by flows and sentiment than fundamentals.

- ANI

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Reader Comments

P
Priya S
Gold prices up 60% this year! 😱 My parents were right about investing in gold as a hedge. With the rupee falling, it seems like the only safe asset for middle-class families right now.
M
Michael C
Watching from the US. The US-India trade deal is crucial for both economies. The uncertainty is causing real market pain. Hope both sides can finalize something soon to provide stability.
R
Rohit P
Mexico imposing a 50% tariff? That's a big blow. Our exporters are already struggling. The government's diplomatic channels need to work overtime to resolve these trade disputes. "Atmanirbhar" is good, but we still need strong export markets.
S
Shreya B
Respectfully, while global factors are there, we must also look inward. The record trade deficit is a major concern. We need policies that boost manufacturing for both domestic consumption and exports, not just reactive measures when the rupee falls.
K
Karthik V
RBI is doing the right thing by not defending a specific level. Artificial propping up drains forex reserves. A gradual adjustment is better. Volatility is painful, but it's part of a market-determined exchange rate. Stay strong, Rupee! 💪

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