22.12.202506:58:00UTC+00Indian Rupee Eases from One-Month Peak

The Indian rupee has declined to approximately 89.9 against the US dollar, retreating from a recent one-month high. This decline is attributed to robust demand for the dollar and a surge in corporate hedging activities. Last week, the rupee rebounded by nearly 2% from its record lows, aided by two substantial interventions from the Reserve Bank of India. Despite this resurgence, forward premiums have persisted at elevated levels, thereby increasing hedging costs. The heightened demand, additional dollar inflows, and adjustments in market positions have all contributed to the rise in premiums, rendering it more costly for businesses to hedge their exposure and escalating the risk for speculative activities. Since the beginning of the year, the rupee has depreciated by more than 6%, marking it as one of the poorest-performing currencies among emerging markets. This decline is largely due to the ongoing impact of significant US tariffs, which have dampened market sentiment. The rupee is likely to remain under pressure until there is tangible progress in trade negotiations with the United States. In other developments, India and New Zealand have successfully negotiated a free-trade agreement, which either eliminates or significantly reduces tariffs on most New Zealand exports to India. This progress comes despite stalled trade discussions with both the US and the EU.