The Albany Gazette - Indian rupee hits fresh record low past 90 per dollar

The rupee is among Asia's worst forex performers this year, pressured by India's current account deficit and foreign outflows.

New Delhi's early trade negotiations with Washington sparked optimism that foreign capital would flow into the world's fifth-largest economy -- helping push the rupee to a nearly six-month-high of 83.75 against the dollar in May.

But setbacks in trade talks and weak corporate earnings have caused overseas investors to offload well over $16 billion in Indian shares this year so far.

On Wednesday morning, the rupee weakened as much as 0.35 percent to a symbolic new low of 90.19, according to Bloomberg data.

Dilip Parmar, an analyst at HDFC Securities, told AFP the rupee's fall was "first and foremost" an "imbalance of demand and supply" with foreign fund outflows and trade deal uncertainty adding fuel to the fire.

But another key factor, Parmar added, was a lack of "big and impactful" intervention from India's central bank.

Analysts say the Reserve Bank of India (RBI) has this year sporadically defended the rupee through aggressive dollar sales to support key levels, but also appears of late to be allowing greater currency flexibility.

"Defending a specific level in the current macro backdrop would be costly and counterproductive," Raj Gaikar, research analyst at SAMCO Securities, told AFP.

"With inflation running well below earlier expectations, the policy priority has shifted toward supporting growth rather than expending reserves to hold an artificial line," he said.

The central bank was intervening only to ease volatility, not to reverse a trend driven by fundamentals, Gaikar added.

He expects the rupee to settle in a "88-92 range".

"This more hands-off approach signals a transition to a market-aligned regime rather than a rigid defence of symbolic levels," he said.

(R.White--TAG)