INR vs USD: Rupee falls to 90.11 against US dollar. What's the near-term outlook for the currency?

The Indian rupee declined by 16 paise to 90.11 against the US dollar in early trade on Monday, led by high crude oil prices and ongoing foreign fund outflows. Forex traders noted that strong demand for the dollar from corporates, importers, and foreign portfolio investors added to the rupee's weakness.

The rupee started at 90.07 against the dollar in the interbank market before slipping to 90.11, down 16 paise from its previous close.

On Friday, the rupee closed at 89.95 against the dollar, following the Reserve Bank of India's first interest rate cut in six months.

What's behind the depreciation?

Forex traders noted that investors are now concentrating on the Federal Reserve’s policy decision scheduled for December 9–10. The markets are currently pricing in almost a 90 percent chance of a rate reduction next week.

At the same time, India and the United States will begin three days of discussions starting December 10 on the initial phase of their proposed bilateral trade agreement, to be held here.

"The US team is in India on 10th December, and simultaneously the EU team is also in India to meet the Commerce Minister on trade negotiations and finalising an FTA. We await for positive outcomes on both counts. " said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP, was quoted as saying by PTI.

Bhansali further said that FPIs are still net sellers even though Indian equities are rising. The dollar index and Asian currencies are both stable within a range, so there are no clear signals from either side.

Rupee Outlook

According to Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, RBI’s 25 bps rate cut may offer some stability to financial sectors, however, delays in the India–US trade deal and soaring bullion and metal prices continue to weigh on sentiment.

“Rupee traded slightly weak by 0.08 paise at 89.92 as the dollar index stayed flat, but persistent FII selling kept pressure on the currency. Rupee is expected to move within a range of 89.75–90.25,” Trivedi said.

Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.