Rupee settles flat at 84.90 against US dollar amid weak trade data and market slump
Rupee ends flat at 84.90 against the dollar as trade deficit hits record high; weak domestic markets, surging gold imports, and FII outflows weigh on sentiment ahead of Fed meeting.
The Indian rupee traded in a narrow range and ended marginally higher by 1 paisa at 84.90 against the US dollar on Tuesday. Pressure on the domestic unit remained due to weak domestic markets, disappointing trade balance data, and persistent dollar demand from importers and foreign banks.
At the interbank foreign exchange, the rupee opened at 84.89 and touched an all-time low of 84.93 during intra-day trade before settling slightly higher. On Monday, the rupee had closed at a record low of 84.91.
Trade deficit at record high
India’s trade deficit widened to an all-time high of USD 37.84 billion in November, driven by a sharp surge in gold imports. Exports for the month contracted by 4.85 per cent year-on-year to USD 32.11 billion, further weighing on sentiment.
Gold imports reached a record USD 14.86 billion in November, marking a four-fold increase from USD 3.44 billion in the same period last year. Analysts attribute this spike to heightened demand during the festival and wedding season.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said, “The rupee is likely to trade with a negative bias amid weak domestic markets, concerns over an economic slowdown, and strong dollar demand. Further foreign institutional investor (FII) outflows may put additional pressure.”
Market performance and global factors
On the domestic equity front, the Sensex dropped 1,064 points or 1.30 per cent to settle at 80,684, while the Nifty plunged 332 points or 1.35 per cent to 24,336. Weak market sentiment further dented investor confidence.
Meanwhile, the dollar index, which measures the greenback’s strength against six major currencies, rose 0.17 per cent to 107.03. Brent crude oil futures slipped 0.49 per cent to USD 73.55 per barrel, offering limited relief.
Choudhary noted that traders will keep a close watch on upcoming US retail sales and industrial production data. Additionally, all eyes are on the Federal Reserve's interest rate decision and commentary later this week.
Outlook
The USD/INR pair is expected to trade in a range of 84.75 to 85.15 in the near term as global cues and FII flows remain crucial factors for the rupee's movement.
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