The Indian rupee has hit an all-time low against the US dollar, raising concerns among economists and investors. On Monday, the rupee fell by 58 paise to reach ₹86.62 against the dollar, marking its weakest performance in nearly two years. This sharp decline is attributed to the strengthening of the US dollar and rising crude oil prices.
Why Did the Rupee Fall?
The rupee’s decline began during early trading on Monday, starting at ₹86.12 in the interbank foreign exchange market. By mid-session, it had dropped to ₹86.62, losing 58 paise against the dollar. This is the first time in almost two years that the rupee has fallen so sharply in a single day.
The primary reasons behind this drop include:
1. Stronger US Dollar : The dollar has been gaining strength globally, putting pressure on emerging market currencies like the rupee.
2. Rising Crude Oil Prices: India, being a major importer of crude oil, is heavily impacted by increasing oil prices, which further weakens the rupee.
Rupee’s Performance Over the Years
The rupee has been on a downward trend for some time now. On February 6, 2023, it had fallen by 68 paise, and by December 30, 2024, it had reached ₹85.52 against the dollar. Over the past two weeks alone, the rupee has lost nearly ₹1 in value.
Impact on Foreign Investments
The weakening rupee has led to a significant withdrawal of foreign investments from the Indian stock market. Last Friday, Foreign Institutional Investors (FIIs) pulled out ₹2,254.68 crore in a single day. So far in January, FIIs have withdrawn a total of ₹22,194 crore from Indian markets.
The Reserve Bank of India (RBI) is expected to take corrective measures to stabilize the rupee. The central bank may adjust its policies to support the currency and prevent further depreciation.
Recently, the RBI released key data showing that India’s foreign exchange reserves dropped by $5.693 billion to $634.585 billion as of January 3. Despite this, India’s industrial production (IIP) grew by 5.2% in November 2024, driven by festive demand and a recovery in the manufacturing sector.
What’s Next for the Rupee?
With the rupee hitting record lows, all eyes are now on the RBI and the government to take steps to stabilize the currency. Rising crude oil prices and a strong US dollar continue to pose challenges, but corrective measures and policy changes could help restore confidence in the Indian economy.
