The Indian rupee continued its losing streak against the US dollar on Wednesday, declining by 9 paise to touch a fresh low of 90.05 in early trading sessions. This drop follows a significant fall of 42 paise on Tuesday, when the currency closed at 89.95 versus the greenback.
What's Driving the Rupee's Decline?
The rupee's downward momentum is attributed to a mix of domestic and international pressures. Market analysts point to dollar-buying activity by importers and speculators covering their short positions as immediate triggers. The broader strength of the US dollar in global markets and the continued delay in finalizing the first phase of the India-US Bilateral Trade Agreement (BTA) are also applying sustained pressure on the local currency.
Expert View: A Reversal Hinges on Trade Deal
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, offers a glimmer of hope. He suggests the current depreciation trend could halt and even reverse once the much-anticipated India-US trade deal is sealed, an event likely to occur this month. "The rupee depreciation will halt and even reverse when the India-US trade deal materialises," Vijayakumar stated. However, he cautioned that the specifics of the deal, particularly regarding tariffs imposed on India, will be crucial in determining the final outcome.
Market Concerns and FII Sentiment
The analyst highlighted a growing concern among investors. The persistent fall in the rupee's value, coupled with the Reserve Bank of India's (RBI) apparent non-intervention to support it, is creating unease. This fear of further depreciation is compelling Foreign Institutional Investors (FIIs) to sell their holdings, despite positive indicators like rising corporate earnings and a strong rebound in India's GDP growth. This selling pressure is contributing to the slow drift downward observed in the equity markets.
In summary, while immediate factors like dollar demand and global strength are weighing on the rupee, all eyes are now on the progress of the India-US trade negotiations, which market experts believe could be the key catalyst for a turnaround.
