Rupee breaches 91 mark for first time, lower trade deficit can't arrest rupee fall; here's why

The Indian rupee today fell for the fourth straight session today, breaching the 91 per dollar mark in the afternoon session. The fall can be attributed to tariff pressures from Washington, which continue to affect India's trade prospects and capital inflows. High demand for dollars and sustained foreign investor outflow have also kept the Indian currency under pressure. 

The rupee slipped to a fresh low of Rs 91.07, falling 33 paise on Friday against the previous close. 

On Monday, the rupee closed at an all-time low of 90.74 (provisional) against the US dollar, clocking a loss of 25 paise over its previous close. 

VK Vijayakumar, Chief Investment Strategist, Geojit Investments said, "Further sharp weakness in rupee was not expected today since the November trade data has come better-than-expected. Covering of short positions may be a factor in today’s decline. Sustained FII selling is acting like a vicious cycle pulling the rupee down. 

Normally when rupee declines, the RBI intervenes by selling dollars to stem the decline of the rupee. But recently the RBI’s policy has allowed the currency to fall. Low inflation in India ( 0.71% in November ) is the reason for this non-intervention by the central bank. Rupee depreciation is not hurting the economy. India’s November trade deficit declining to $24.53 billion from $41.68 billion in October is positive for the rupee."

The persistent weakness of the rupee occurs against a backdrop of broader economic uncertainties and international trade issues. As policymakers and traders navigate these challenges, the currency’s performance remains closely watched by investors.

By stabilising the rupee through interventions, the Reserve Bank of India aims to mitigate short-term fluctuations. The ongoing tariff discussions and economic indicators such as the CPI will likely continue to influence the rupee's trajectory in the short-to-medium term.