FX.co ★ Indian Rupee Falls Near Record Low

The Indian rupee is edging closer to 91.6 per dollar, lingering near its record low earlier this week, largely due to ongoing capital outflows. The withdrawal of foreign investments, propelled by a dramatic stock market decline that has wiped out $360 billion this year, is fueling demand for the US dollar and leaving the rupee vulnerable. Meanwhile, investor interest is intensely focused on India’s newly established "mother of all deals" free trade agreement with the European Union, seen widely as a strategic countermeasure to the unpredictable US trade policies. Concerns about how the US administration might respond to this agreement are compounding risk aversion, making dollar-denominated assets more appealing to investors. Despite encouraging domestic economic indicators, such as strong manufacturing and services Purchasing Managers' Indices (PMIs) in January, investors are exercising caution due to India's vulnerability to US tariffs on goods and oil imports, alongside key upcoming fiscal policy announcements, thus offsetting potential easing effects from a weaker dollar.