Rupee may open at fresh record low, with risk-off tone compounding flow mismatch
The Indian rupee is likely to open at a fresh lifetime low on Tuesday, as a deteriorating risk backdrop amplifies pressure from persistently lopsided flows that have remained a drag on the currency.
The 1-month non-deliverable forward indicated the rupee will open in the 90.80-90.85 range against the U.S. dollar, after settling at 90.73 on Monday.
The currency slipped to a fresh all-time low of 90.7875 on Monday, extending its run of record lows to a third straight session.
Over the past sessions, bankers have pointed out the rupee was being weighed down by a persistent mismatch in dollar demand and supply.
Fixing-related dollar buying, possibly tied to NDF maturities and portfolio outflows, has been a recurring feature, while dollar purchases by state-owned enterprises added to the strain, they say.
Bankers added that importer hedging demand has consistently outstripped exporter selling in recent sessions, driven by a weak rupee outlook and limited willingness among exporters to hedge.
"The current phase of rupee weakness appears more flow-led than panic-driven," India Forex and Asset Management said.
"Capital outflows are outweighing India's structural strengths in the near term. Until there is a clear reversal in portfolio flows or a positive catalyst on the trade front, rupee is likely to remain under pressure."
RISK AVERSION ADDS TO PRESSURE
Risk appetite was fragile in Asia on the day, with equities sliding and U.S. futures pointing to further losses after Monday's drop. Most Asian currencies slipped.
Investors were wary ahead of a run of U.S. economic data releases, including the delayed November jobs report, which could offer clues into the Federal Reserve's policy path.
While the Fed delivered a widely expected rate cut last week and signalled only one additional reduction in 2026, markets are still leaning toward at least two cuts next year.
"With the flow picture so skewed (for rupee), any negative cue tend to be magnified," a currency trader at a Mumbai-based bank said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 91.14; onshore one-month forward premium at 29 paise
** Dollar index down at 98.24
** Brent crude futures down 0.6% at $60.2 per barrel
** Ten-year U.S. note yield at 4.17%
** As per NSDL data, foreign investors bought a net $14.9 million worth of Indian shares on December 12
** NSDL data shows foreign investors bought a net $41 million worth of Indian bonds on December 12
