indian currency rupee
The Indian rupee remains at a record low, while the US dollar index has fallen to its lowest level in two months. The reason for this is that traders are uncertain about the India-US trade deal and are worried about heavy selling by foreign investors. On Friday, December 12, the rupee fell to a record intraday low of 90.56 against the dollar, which was 24 paise below the previous closing price. At closing, the rupee stood at 90.49 i.e. a decline of 17 paise was recorded. There are many reasons behind the fall in rupee. But the reason that is being talked about the most is the trade deal between India and America. Let us understand in this news that if a deal is made between India and America, will the rupee make a comeback?
Amidst the fall in rupee, foreign investors are also leaving the stock market. The continuous selling by foreign portfolio investors (FPIs) is showing no sign of stopping. So far in the month of December alone, FPI outflow has reached Rs 17,955 crore. According to NSDL data, the total sales in the entire year have increased to Rs 161,630 crore. According to PTI report, India and America completed two-day talks on Thursday on the trade deal front. During this, both the countries discussed trade related issues, which also included the ongoing talks regarding a mutually beneficial bilateral trade deal.
Will India-US trade deal boost the rupee?
In a Mint report, Harshal Dasani, business head of INVAsset PMS, said that the new low level of the rupee is more due to uncertainties related to India than the strength of the dollar. The dollar index has come down from its recent high level after the Fed’s interest rate cut and America’s weak economic data. It is clear from this that the strength of the dollar is now weakening at the global level.
According to Reuters data, the dollar has weakened by 1.1% so far in the month of December. The dollar index has fallen more than 9% this year and is heading towards its biggest annual decline since 2017. Dasani said that the market had already factored in the prices of expectations like tariff changes and greater market access, but the absence of any clear announcement has put temporary pressure on investor sentiment. He said that on one hand the global dollar is weak and on the other hand the rupee remains weak, this shows how uncertainty regarding the trade deal is affecting the USD-INR.
attitude of foreign investors
However, with no concrete results being achieved even after months of talks, there is a risk that the deal may either remain incomplete or may not live up to expectations. In such a situation, Riya Singh, Commodity and Currency Research Analyst of MK Global Financial Services, said that a weak deal will remain a threat of tariffs for a long time and may increase market concerns. This may further accelerate the current withdrawal of foreign investors.
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