Rupee Hits Record Low of 88.75 Against Dollar
The Indian rupee has recently reached a new low of 88.75 against the US dollar, marking a significant moment in the country’s economic landscape. This decline is largely attributed to the US administration's decision to drastically increase the H-1B visa application fee, a move that has raised concerns among stakeholders in India. The fee has surged from $1,000 to a staggering $100,000 for new applications, which analysts believe could lead to a slowdown in remittance growth and adversely affect service exports to the US.
On Tuesday, the domestic currency slipped by 44 paise to close at 88.75, down from the previous close of 88.31. During the day, it even touched a record low of 88.80. Anindya Banerjee, head of commodity and currency research at Kotak Securities, pointed out that the rupee's depreciation is influenced by worries over potential visa changes and ongoing trade tensions between the US and India.
Despite strong domestic economic indicators, the rupee's performance has been under pressure due to persistent bearish sentiment among traders, driven by external factors and a continuous outflow of foreign funds. Over the past three months, foreign investors have net sold domestic equities worth Rs 61,522 crore, largely due to uncertainties arising from tariff issues.
Looking forward, analysts suggest that the rupee is likely to maintain a weaker bias, with some possibility of slight recovery supported by stable USD sentiment and potential foreign portfolio investor inflows. Key domestic factors, such as a projected 25 basis points cut in the repo rate by the Reserve Bank of India (RBI) and the outcome of trade discussions between India and US representatives, will be crucial to watch for future direction.
Dipti Chitale, CEO of Mecklai Financial Services Pvt Ltd, indicated that in the absence of favorable global flows, the rupee could remain under pressure, although interventions by the RBI may provide temporary stability. In the near term, the USDINR exchange rate is expected to fluctuate within a range of 88.00 to 89.50.
