Rupee Tumbles to Record Lows as FPI Selloff Deepens and RBI Watches
Rupee Tumbles to Record Lows as FPI Selloff Deepens and RBI Watches
Rupee weakens amid heavy foreign outflows and stalled trade talks, with markets eyeing RBI steps to steady the currency.
The rupee showed high volatility in early trade as December stretches of foreign fund outflows continued to weigh on the currency, even as easing Brent crude prices offered a glimmer of support. Forex traders said the key driver of the weakness remained persistent Foreign Portfolio Investor (FPI) selling across both equity and debt markets, with large sums being pulled from Indian assets on a near-daily basis in recent weeks. Despite the selling pressure, Brent crude hovered near multi-year lows around $59 per barrel, helping the local unit recover from intraday lows.
In the interbank market, the rupee opened at 91.05 per U.S. dollar, down 12 paise from the previous close, but later staged a sharp bounce to an early high of 89.96 and traded around 90.18 at 9:46 a.m. on the trading day. By comparison, the previous session had seen the rupee slip below 91 per dollar, with a low of 91.14 before settling at 90.93. The dollar index held modest gains near 98.31 as the market weighed the broader risk environment. Brent crude remained at about $59.54 a barrel, driven by a mix of record non-OPEC supply, soft Chinese data, and optimism about a Ukraine ceasefire.
Analysts noted that the depreciation pressure is linked to ongoing developments around India’s trade talks with the United States and prospects surrounding the country’s trade deficit. While policymakers are rarely comfortable with sustained depreciation, some market participants cautioned that the currency could see further moves if FPI outflows persist or if trade negotiations stall further. Traders also watched for possible RBI intervention to stabilize the currency, a step that has historically provided brief relief during periods of volatility. The evolving mix of weak external cues and domestic policy signals continues to shape near-term risk sentiment for the rupee.
For exporters and importers alike, the move underscores the sensitivity of the rupee to cross-border capital flows and trade negotiations, highlighting the potential impact on inflation, borrowing costs, and overall market stability in the near term.
