Rupee's historic fall, currency market has never seen such devastation

On Tuesday, the rupee once again witnessed a historic decline. For the first time, it crossed the 91 mark against the dollar. Significantly, the rupee moved from 90 to 91 against the dollar in just 10 trading days. 

According to data, the rupee first crossed 90 against the dollar on November 2nd. Experts believe that the main reasons for the rupee's decline are profit-booking by foreign investors and the delay in the trade deal between the United States and India.

Surprisingly, crude oil prices are falling in the international market. Experts predict the rupee could even cross the 92 mark against the dollar this month. 

The rupee has already depreciated by more than 6 percent against the dollar this year. Let us explain the current level of the rupee's trading against the dollar...

Catastrophe in the currency market, historic fall in the rupee

The currency market continued to be turbulent on Tuesday, with the rupee suffering a historic decline against the dollar. The rupee fell 36 paise during the trading session, surpassing 91 against the US dollar for the first time. Continued foreign investment (FII) outflows and uncertainty surrounding the India-US trade deal contributed to the rupee's decline.

The rupee has fallen from 90 to 91 per dollar in the last 10 trading sessions. In the last five sessions alone, the local currency has fallen 1 percent against the US dollar. Forex traders expect the rupee to cross 92 per dollar this month.

At 11:45 am, the rupee was trading at 91.14 against the US dollar, down 36 paise from its previous close. The rupee opened at 90.87 against the US dollar at the interbank foreign currency exchange market and continued to decline as the session progressed. On Monday, the rupee closed at a new all-time low of 90.78 against the US dollar, down 29 paise from its previous close.

Why is the rupee falling?

Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, said a US-India trade deal is unlikely soon because (US President) Donald Trump appears unwilling to agree without addressing agricultural issues, and India has clearly opposed it. This is why the rupee has crossed 91 and could even reach 92 this month.

He further stated that fluctuations in trading volumes, a rupee depreciation due to tax withdrawals, oil purchases by speculators, the lack of a trade deal, dollar hoarding by exporters, withdrawals by foreign investors, and debt sales are contributing to the rupee's decline. He also said that despite a narrowing of the trade deficit on Monday, the local currency did not improve.

From inflation to the fall in the dollar index

According to exchange data, foreign investors sold shares worth ₹1,468.32 crore on Monday. Furthermore, according to government data, wholesale price inflation remained negative for the second consecutive month at (-) 0.32 percent in November, although prices of food items such as pulses and vegetables increased month-on-month. Inflation based on the Wholesale Price Index (WPI) was (-) 1.21 percent in October and 2.16 percent in November last year.

Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, fell 0.03 percent to 98.27. In the international market, Gulf crude oil Brent crude futures fell 0.61 percent to trade at $60.19 per barrel. 

In the domestic stock market, the 30-share benchmark Sensex fell 363.92 points to 84,849.44 in early trade, while the Nifty fell 106.65 points to 25,920.65.

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