India rupee slipped to its weakest level on Wednesday, Dipping down to a record low to its previous all-time low of 89.9475 on Tuesday to 90.13 per US dollar and showing no signs of stabilizing in early trade. The rupee has declined 4.9% so far this year, making it Asia’s worst-performing currency, despite official data showing India economy expanded at its fastest pace in six quarters in July-September.
The lack of forceful intervention by the Reserve Bank of India (RBI) and persistent foreign outflows contributed to the loss, according to analysts. In the meantime, steep 50% tariffs on Indian goods have weighed on exporters, while strong imports have kept dollar demand high and added pressure on the rupee. As global investors pulled $16 billion money out of Indian markets the dollar continued to strengthen against most major currencies. Together, these pressures have played a role in widening the country’s current-account deficit in the September quarter.
According to Kotak Securities Ltd., the RBI will need to step in more decisively to curb speculative pressures on the currency. “If they allow the rupee to close above 90, we could see further speculative bets and the possibility of the rupee heading to 91.” Anindya Banerjee, a currency analyst at Kotak Securities, told Bloomberg News. The recent slide is “hard to justify on a fundamental basis”, he said. A weaker currency has immediate consequences for households, businesses, Students and travelers feel the impact almost instantly. Companies with overseas loans see repayment costs go up and Import bills, especially for crude oil, electronics and industrial goods price is expected to rise exponentially.