Indian rupee again depreciated on November 22 to clasping a record low of ₹84.50 against the US dollar due to the high dollar index, heavy FPI selling, and escalating geopolitical risks.
The US Dollar Index based on the six major currencies has risen to 3.10% this month to almost reach the highest level seen in nearly two years. The dollar is up due to sound fundamentals in the US economy, as well as anticipated inflationary policies under Trump’s administration. It touched the 52-week High of 107.18 this week based on expectations that the US interest rate will not be changed soon.
India’s share markets wary as foreign outflows rise
Worse, the rupee crisis is compounded by a selling spree of the Indian equities by FPIs, eroding the bulls’ defense. November has witnessed withdrawals of close to ₹40,000 crore and this has been mainly due to poor Q2FY25 earnings and apprehensions over GDP growth in India. The cumulative FPI outflow in October also touched the highest level of ₹1.14 lakh crore indicating that the pressure will continue to build on the domestic currency.
Techniques and Policies of the RBI and Market Projections
Even after the RBI’s routine intervention, the rupee has slipped by 0.5% this month. As others too have felt the heat, Asian currencies fell between 0.9% to 2.2% in November.
In the second term of Trump’s presidency, the SBI Research report predicts that the rupee can drop to 8 to 10 percent before it levels up. Some of the concern areas for the RBI are that a weaker rupee raises import costs and serves to push up inflation and that the profitability of corporates may have been affected.
Short-Term Weakness Expected
For the near term, analysts predict a range of ₹84.35 for the rupee with an upper range of ₹84.65. “High-risk aversion level globally along with some specific issues in India like the concerns for the Adani Group company have led to FPI selling,” added Jateen Trivedi, VP Research Analyst, LKP Securities.
The difficult conditions are unfolding as the dollar strengthens further to threaten the INR thereby necessitating a strong policy framework to support the currency.
