Rupee Breaches 90: How Delayed US Trade Deal and FPI Outflows Fuel the Fall

At the time of filing this report, the Rupee was trading at 90.205 per US dollar. So far this year, the currency has depreciated by over 5 per cent on a cumulative basis.

According to Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, the Rupee was pressured by the absence of a confirmed India-US trade deal and "repeated delays in timelines."

"Markets now want concrete numbers rather than broad assurances, leading to accelerated selling in the rupee over the past few weeks," Trivedi added.

"Muted RBI intervention has also contributed to the swift depreciation. With the RBI policy announcement on Friday, markets expect clarity on whether the central bank will step in to stabilize the currency. Technically, the rupee is deeply oversold, and a move back above 89.80 is essential for any meaningful recovery."

Anindya Banerjee, Head Commodity and Currency, Kotak Securities, said the Indian Rupee-US Dollar extended its rise toward the 90 mark today, driven by continued short-covering from speculators and sustained importer demand.

"The 90 level is a major psychological barrier -- and a cluster of buy-stop orders likely sits above it. This is precisely why the RBI must remain active below 90; if the pair starts sustaining above this zone, the market could quickly shift into a higher trending phase toward 91.00 or even higher," Banerjee noted.

At this stage, according to Banerjee, it is essential for the central bank to prevent speculators from becoming too comfortable with a one-way trend, "as that can trigger an unnecessary spike in USD/INR volatility."

Anindya Banerjee also echoed that multiple pressures, including FPI outflows from equities, uncertainty over the India-US Bilateral Trade Agreement, are weighing on the Rupee. From a technical perspective, the key support is 88.80-89.00, immediate resistance at 90.00, and the next major hurdle at 91.00.

Dharmakirti Joshi, Chief Economist, CRISIL Limited, told ANI on Tuesday that he sees the rupee appreciation around the corner.

"My belief is that if you get a trade deal (with the US), I think the depreciated rupee will again start appreciating, and I think it also depends quite a lot on what the global financial conditions are, and our expectation is that the rupee will strengthen from these levels in the months ahead," Joshi noted.

- ANI