The BRICS TimesThe Indian rupee has hit its all-time weakest level versus the US dollar just as the Reserve Bank of India’s Monetary Policy Committee (MPC) meeting kicks off today, December 3rd.
The Indian rupee has dramatically fallen into a deep slump before the Reserve Bank of India’s (RBI) MPC meeting. On Wednesday, December 3rd, the rupee crossed the significant 90 level against the US dollar. This marks an all-time low for the Indian currency.
In early trading, the rupee opened at 89.96 per dollar. It quickly dropped further to 90.1325. This followed a previous closing rate of 89.87. This sharp fall comes after the currency already reached a record low on Tuesday. Currency experts suggest continuous selling by foreign investors is weakening the rupee. They also cite the stalled India-US trade deal talks as a major factor.
Why the Rupee is Sinking
The rupee has dropped nearly 5 percent against the dollar this year. This makes it Asia’s worst-performing currency. A record-high trade deficit is pressuring the currency. Consistent outflows of funds by foreign investors are also contributing to the stress. Furthermore, discussions on the trade deal between the US and India remain unresolved.
All these factors are causing the rupee to decline even though the dollar Index is showing weakness. Increased imports, especially of gold and silver, are contributing to this. Export declines due to new tariffs have worsened the merchandise trade gap. This gap has expanded to a massive $41.68 billion. This growth increases the demand for the dollar. Higher dollar demand ultimately puts pressure on the rupee, leading to its depreciation.
Will the Rupee Fall Further?
Experts predict that the rupee might stay under pressure for some time. The rising trade deficit is a concern. Uncertainty surrounds the US-India trade agreement. Weak portfolio flow is keeping the dollar in demand.
The RBI is actively intervening to slow the rupee’s fall. However, sustained outflows and the dollar’s global strength may push the currency lower over time. The extent of any further weakening from the current level will now depend. It hinges on the RBI’s intervention strategy and improvement in foreign investment flow.
