Athira Sethu
Kochi, 15 January 2025
The rupee has touched an all-time low of 86.63 against the greenback in a very short span of time, mainly because the US dollar is gaining more strength. Several global factors such as the rise of the US economy, increasing oil prices and selling by FIIs (foreign institutional investors) from India are driving this outcome. In fact, according to experts, the rupee may continue to slump and may even go below 90 per dollar sooner than later. Although the Reserve Bank of India is trying to stabilize the currency, the weakening trend might continue.
The rupee drifted to a fresh low of 86.6475 against the dollar on January 13, 2025, before closing at 86.63. This has been the sharpest fall in nearly two years. The American currency’s strength is partly due to the impending US presidential inauguration. Whereas RBI has been helping the rupee by selling dollars, some of the experts still believe that the central bank would not be able to keep controlling the situation for too long.
The rupee mainly falls when the US dollar is strong. The US economy is improving, and US interest rates are higher than Indian interest rates. So money tends to go out of countries like India. Ongoing global tensions with the Russia-Ukraine war and Middle East problems, which cause uncertain oil prices, also tend to make the value of the rupee go low.
Even though the rupee has declined, it is still relatively stable compared to other currencies. According to a report by the State Bank of India (SBI), the rupee has only dropped by 3% against the US dollar, which is lower than many other countries’ currencies. The stability of the rupee in early 2024 was partly due to the inclusion of Indian bonds in global bond indices, which helped attract foreign investment.
It can be said that the weaker rupee will favor some sectors like IT and textiles. However, in the case of industries relying too much on imports, it might cause problems. It is, in any case, an opportunity to note the influence of global economic trends on the Indian currency and careful management of foreign exchange reserves by the RBI.
