 "Rupee weakens to new low of 84.93 as trade deficit hits record high")
The rupee depreciated to a new low of Rs 84.93 per dollar on Tuesday due to the widening of India’s merchandise trade deficit in November, and selling in domestic equities, said dealers.
The local currency settled at Rs 84.90 per dollar as the Reserve Bank of India (RBI) intervened in the foreign exchange market via dollar sales. On Monday, it had settled at Rs 84.87 per dollar.
“The rupee fell because of trade deficit data. Additionally, there was demand for dollars from oil importers, and there was selling pressure in equities,” said a dealer at a state-owned bank. “The RBI was there at Rs 84.90 per dollar,” he added.
Market participants said that the pressure on the Indian unit is expected to continue and it might breach the 85 per dollar mark by the end of the current month, and further, it might breach the Rs 85.50 per dollar mark by March 2025.
“Wider trade deficit as well as slowdown in capital inflows resulted in the balance of payments being negative, which has put pressure on the rupee,” said Gaura Sen Gupta, chief economist, IDFC FIRST Bank. “We see the rupee touching 85.50 per dollar by March and 86.50 by December 2025,” she added.
The rupee depreciated by 1.99 per cent in the current calendar year so far. In the current month, it has depreciated by 0.48 per cent. The current financial year has witnessed 1.76 per cent depreciation so far.
“…we continue to maintain our recently revised FY25E USDINR projections at 86-86.5 by March 2025,” said Elara Securities in a note.
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India's trade deficit hit a record high of $37.8 billion in November, up from $27 billion in October. Compared to the same month last year, the deficit nearly doubled from $20.7 billion. This was driven by a 4.8 per cent year-on-year (Y-o-Y) drop in exports to $32 billion in November, following a 17.2 per cent growth in October, as global demand softened.
Imports surged to an all-time high of $70 billion, growing 27 per cent Y-o-Y in October and another 3.6 per cent Y-o-Y in November. Seasonal demand for commodities like gold, silver, and precious stones pushed imports to $16.4 billion, almost double last year’s level. Core imports (excluding oil and gold) rose 6.1 per cent Y-o-Y to $37 billion, making up 50 per cent of total imports.