India’s rupee fell to a fresh record low on Wednesday, extending its recent declines, with traders partly blaming the delay in striking a trade deal with the United States.
The currency weakened as much as 0.35% to a symbolic new low of 90.19, according to Bloomberg data, and is among Asia’s worst forex performers this year.
It has also faced pressure due to India’s current account deficit and foreign outflows.
New Delhi’s early trade negotiations with Washington sparked optimism that foreign capital would flow into the world’s fifth-largest economy — helping push the rupee to a nearly six-month-high of 83.75 against the dollar in May.
But trade talk setbacks and weak corporate earnings have caused overseas investors to offload well over $16bn in Indian shares so far this year.
Dilip Parmar, an analyst at HDFC Securities, told AFP the rupee’s fall was “first and foremost” an “imbalance of demand and supply” with foreign fund outflows and trade deal uncertainty adding fuel to the fire.
Parmar added that another key factor was a lack of “big and impactful” intervention from India’s central bank.
Analysts said the Reserve Bank of India (RBI) has this year sporadically defended the rupee through aggressive dollar sales to support key levels, but also appears of late to be allowing greater currency flexibility.
Raj Gaikar, research analyst at SAMCO Securities, said:
The central bank was intervening only to ease volatility, not to reverse a trend driven by fundamentals, Gaikar added, expecting the rupee to settle in a “88-92 range”.