Rupee hits record low on feeble foreign flows, drawing RBI to defend 90 level

Synopsis The Indian rupee hit an all-time low Tuesday, pressured by trade deficits and tepid inflows, despite strong economic fundamentals. The Reserve Bank of India intervened to prevent a breach of the 90 per dollar mark. Analysts suggest underlying weaknesses may force the RBI to allow further depreciation over time, as foreign investors pull back and importers rush to buy dollars. The Indian rupee dropped to an all-time low on Tuesday, with sustained flow pressures and the lack of a US-India trade deal overshadowing robust domestic fundamentals, prompting the central bank to step in the prevent the currency from breaking past the 90 level. The rupee was down 0.28% at 89.7975 per dollar, inching past Monday's all-time low of 89.7575. It briefly fell to 89.85, at risk of slipping past the 90 level before the Reserve Bank of India intervened to stem the decline. "We expect RBI to actively intervene to cap USD/INR," analysts at MUFG Bank said in a note. The currency is losing ground despite robust economic growth in India in the quarter through September and low inflation that would typically lend support to the currency. Those fundamentals have been set aside by investors focused on currency flow dynamics, with both portfolio and investment inflows remaining tepid while India's trade deficit has been widening. Live Events India's ballooning trade deficit is expected to push the current account deficit wider in the ongoing fiscal year, economists say. HSBC forecasts that India's current account deficit will rise to 1.4% of GDP in the current fiscal year from 0.6% last year. Underlying fundamentals point to further rupee weakness, suggesting the RBI may eventually allow the currency to slip past 90 over time, according to MUFG Bank. Alongside the prospects of a wider current account deficit, foreign investors have withdrawn nearly $17 billion from Indian equities year-to-date. . Adding to the rupee's woes has been a pick-up in hedging by importers, who are increasingly front-loading their dollar purchases on expectations that the rupee will weaken further. Bankers say this has amplified pressures on the rupee. On the other hand, exporters have been slow to hedge, preferring to delay currency conversions in anticipation of better levels. The lack of a U.S-India trade deal has been a drag on the rupee's outlook, rather than what many analysts had expected to be a meaningful catalyst for improvement in sentiment around the Indian currency. The RBI has been consistently present in the foreign-exchange market, stepping in to slow the rupee's slide. For several weeks, the central bank had defended the 88.80 level, traders say. Once that level finally gave way, the rupee faced incremental depreciation pressure, cumulating in a move to near the 90 mark. (You can now subscribe to our ETMarkets WhatsApp channel) (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price ...moreless How a Sebi report reopened Indiabulls-YES Bank saga that was fading Ever wondered why cos' financials look good before IPO, but not after? From near collapse to INR50k cr value: The journey of MCX AI is forcing a rethink. Can Indian IT finally build a serious corporate VC muscle? Stock Radar: 20% rally in 1 month! BHEL breaks above falling trendline resistance to hot fresh 52-week high Weekly Top Picks: These stocks scored 10 on 10 on Stock Reports Plus 1 2 3