India’s Rupee Plunges to Asia’s Worst Performer as Trade Talks Hit a Wall
India's rupee just took the crown no one wants—Asia's worst-performing currency. The culprit? Stalled trade talks that have investors hitting the sell button.
The Stalemate Sinks Sentiment
When negotiations grind to a halt, currencies feel the pain. The rupee's slide isn't a minor dip; it's a full-blown retreat to the bottom of the regional rankings. Market confidence is evaporating faster than a meme coin's utility.
A Classic Fiat Fumble
This is traditional finance in a nutshell: geopolitical gridlock translates directly into monetary weakness. While central bankers scramble, the move highlights a core vulnerability of legacy systems—they're hopelessly tangled in slow-moving diplomatic webs. It's almost enough to make you appreciate a decentralized ledger. Almost.
For now, the charts tell a clear story: until the talking resumes, the falling won't stop.
Foreign investors head for the exits
Foreign investors have been heading for the exits all year. More than $10 billion has flowed out across different investment types, according to NSDL data. The stock market got hit especially hard—foreign portfolio investors yanked out nearly $18 billion through December 19.
Earlier this month, the rupee broke through the 90-mark against the dollar. That’s a big psychological level. Then it took less than 15 trading sessions to cross 91. The slide has been quick.
Somnath Mukherjee works as CIO and senior managing partner at ASK Private Wealth. He told CNBC’s “Inside India” that the rupee’s troubles aren’t really about India’s current account deficit. That’s expected to stay manageable between 1 percent and 1.5 percent. The real issue is foreign investors pulling out. The rupee will stay under pressure until that trend reverses, he said.
For foreign investors, the weak rupee cuts both ways. Luchnikava-Schorsch called it “a double-edged sword for FIIs.” Sure, it could be “a good entry point for Indian equities.” But investors also have to think about “protracted rupee weakness and trade policy uncertainty,” plus concerns about government finances and growth prospects.
India’s economic challenges have intensified as trade policies shift globally. The world’s fifth-largest economy faces mounting pressure from multiple fronts.
Central bank steps in
India’s central bank said earlier this month it WOULD let market forces set exchange rates. But on Wednesday, the bank reportedly jumped in “aggressively” to stop the currency from falling further.
There is an upside to all this. A cheaper rupee makes Indian exports more competitive globally. And because domestic inflation is relatively low, the country has some cushion to handle higher import costs from the weaker currency.
Recent developments in U.S.-India negotiations suggest both sides are working toward a breakthrough, though concrete results remain elusive. Until then, the rupee is likely to remain under pressure as investors wait for clarity.
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