On Wednesday, the Indian rupee went to a new all-time low of 88.37 against the US dollar slightly violating its previous record of 88.36 it had reached just a week prior. The fall is a manifestation of increasing pressure of the tariff issue with Washington that has blighted investor confidence and darkened India trade perspective. Analysts observe that long term fear of tariffs as well as capital inflows have ensured that the rupee has remained within a narrow range of 88.20 to 87.95 in the recent sessions.
The market insiders have claimed that the Reserve Bank of India (RBI) has been aggressively intervening in foreign exchange market where it has been selling dollars around the 88.20 mark to restrain over volatility. Although these measures have been effective in flattening the sharp swings, they have failed to cut the trend of a steady weakening based on global uncertainties as well as domestic uncertainties.
Meanwhile, the US dollar index, which measures the dollar versus six major world currencies, gained by 0.05 per cent to 97.82, further exerting strain on the emerging market currencies such as the rupee. Brent crude futures fell 0.10 percent to $67.42 per barrel on the commodities front, which given the headwinds affecting the economy, provided some relief to the India import bill but not completely countering the overall headwinds.
The decline of the rupee is in the background of uncertainty in the world economy, trade tensions, and fearful investor moods. According to market observers, the future tariff talks between India and the United States will have a defining influence in the short-run path of the rupee. In the meantime, internal factors like consumer price index (CPI) and inflation perspective will continue to be important predictors to the policy makers as well as traders.
Although the interventions by the RBI will short term stabilise the currency, further steps will strongly rely on the development of the trade negotiations and risk conditions in the world. At this point, both domestic and foreign investors are keen on the path of the rupee.
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