Indian rupee plummets to record low, nears 85 per USD
The Indian rupee has witnessed a sharp fall, hitting an all-time low of 84.94 against the US dollar on December 18. The fall is just six paise shy of the 85 mark, hinting at further decline. The currency opened slightly lower than its previous close at 84.92, down by two paise from 84.90.
US Federal Reserve meeting impacts rupee's value
The rupee's fall comes ahead of a key US Federal Reserve meeting later today. Market players are keenly awaiting the American central bank's decision on whether it will go ahead with another 25 basis point (bps) rate cut. The CME FedWatch Tool shows a whopping 97.1% of investors expect this rate cut, up from yesterday's prediction of 96%.
Chinese yuan's depreciation and US tariffs pressure rupee
Kunal Sodhani, Vice President of Shinhan Bank, has said the weakening Chinese yuan could further drag the rupee down. Further, incoming US President Donald Trump's tweets on tariffs are adding to the pressure on Asian currencies including the rupee. The Indian currency is also being weighed down by foreign investor outflows and an expanding trade deficit recorded in November.
RBI's intervention and forex reserves depletion
The rupee's depreciation is a major concern for the Reserve Bank of India (RBI), which has been intervening in the currency market, resulting in a decline in foreign exchange reserves. In the last two months, India's foreign exchange reserves have fallen by over $46 billion. According to RBI data, the forex reserves were at $654.857 billion on December 6, down from $704.885 billion on October 4.
Rupee's performance in comparison to Asian peers
Despite its recent depreciation, the Indian government has maintained that the rupee has outperformed several of its Asian counterparts. The government made the statement while responding to a query raised in Parliament last week. The rupee's performance is being closely monitored amid these global financial developments and their potential impact on the Indian economy.
