New Delhi [India], December 2 : The Rupee's depreciation continued on Tuesday, with the Indian currency touching a fresh record low and inching steadily towards the 90 mark.
At the time of filing this report, the Rupee was trading at 89.874 per US dollar, with a session high of 89.895, according to publicly available data. The Indian currency has weakened by over 4 per cent this year so far.
According to market experts, the strength of the US dollar and the delay in the first tranche of the India-US BTA are weighing on the rupee.
"Record trade deficits of October month due to higher imports and delay in the U.S.-India trade deal pushed the rupee lower," Prithvi Finmart said.
However, according to the brokerage, better-than-expected Indian GDP data and profit taking in the dollar index could support the rupee at lower levels.
"We expect a rupee to remain volatile this week amid volatility in the dollar index, volatility in the domestic equity markets and ahead of the U.S. Fed monetary policy meetings and a pair could trade in the range of 88.5500-90.6000 this week," Prithvi Finmart said in a report.
So far rupee has depreciated by 0.8 per cent in November alone.
"The depreciation in INR was more pronounced (in November) if we consider the fact that the dollar weakened in the same period. Strong demand from importers, low foreign inflows, uncertainty over US trade deal and an elevated trade deficit, weighed on the domestic currency," according to a Bank of Baroda report, penned by economist Aditi Gupta. According to Aditi Gupta, a surprisingly good GDP print also did not "quite help lift sentiments", with the currency currently trading at a new low.
The Bank of Baroda economist expects the currency to trade with a depreciating bias in the near term, with news on the US-India trade deal a major catalyst for any sharp movement in either direction.
"We expect USD/INR to trade in the range of 89-90/USD this month," the report read.
On the flip side, the rupee is unlikely to depreciate further in the near term, Union Bank of India had asserted in a recent report, providing a rationale that the rupee has already weakened by roughly 4 per cent this year. "Given that the rupee has already weakened by roughly 4 per cent this year, we do not expect significant further depreciation in the near term," UBN report notes.
At the same time, Silver and Gold prices are trading at their fresh record highs, though they witnessed some profit booking today. Silver futures have crossed Rs 180,000 per kg, and Gold futures on MCX crossed the Rs 130,000 mark, data showed.
"Gold and silver gained and gold prices hit 5-week highs while silver surged to record higher levels amid Fed rate cut expectations and profit taking in the dollar index," Prithvi Finmart noted. Safe-haven buying also supported their prices.
"We expect gold and silver prices to remain volatile this week amid volatility in the dollar index, volatility in the global financial markets and ahead of the Fed monetary policy meetings and gold are expected to trade in the range of $4,140-4,380 per troy ounce and silver is expected to trade in the range of $53.50-60.00 per troy ounce this week," it added.
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