Rupee risks steeper fall on tariff woes, weak FDI

Slide in exchange rate underscores divergence in India’s macro data

- REUTERS & FE BUREAU

THE RUPEE'S SLIDE underscores divergence in India’s macroeconomic data — while GDP growth rate is at a six-quarter high, the trade deficit is wider still due to impact of 50% US tariffs on exports.

“Every day that we do not have a trade deal, the FX demand from trade deficit and outflows keeps pushing dollar-rupee higher, while FX supply is relatively thin and inconsistent,’ Joey Chew, head of Asia FX research at HSBC Singapore, told Reuters. “Foreign investors are also losing patience. We had one month of net inflows in October, but without any more trade deal headlines since then, net flows have become flat.” Overseas investors have pulled about $17 billion from Indian equities this year, while net foreign direct investment and overseas commercial borrowings have been soft, worsening the strain on the rupee.