On Monday, the Indian rupee (INR) hit an all-time low of 88.76 against the US dollar due to continuous outbound foreign portfolio investments (FPI) and high demand for the US dollar by companies, forcing the currency down. It is one of the lowest closing rates of the rupee, barely higher than the record low of 88.7975 to the greenback of the previous week.
The currency began on the stronger side at the beginning of trading but dropped steadily during the day. Analysts blamed the decline on a set of factors, which included a consistent selling of FPI, increasing demand for foreign currency by importers, and the uncertainty in the global markets. The intervention of public sector banks in the currency market, which involved selling dollars, was probably influenced by the Reserve Bank of India (RBI), which has been taking a proactive role in ensuring that the rupee is kept down to prevent volatility.
Investors are still wary in the face of the continued apprehension of possible US tariffs on Indian exports and tougher immigration policies that would affect the inflow of foreign investment. This weakness of the rupee has been more aligned with global market trends in general because the dollar index declined by 0.2% to 97.92 before important US economic reports and increased concerns of a potential government shutdown in the US.
Indian stock markets were very quiet even after making initial gains. The BSE Sensex 30-share benchmark closed at 80,364.61 and its wider 50-share NSE Nifty lost 20 points to 24,634.63. According to market analysts, this is due to investor caution on currency pressure and mixed global cues, which have been manifested in a flat equity performance.
In the future, the rupee will be vulnerable to FPI flows, US economic developments and local corporate dollar demand. Interventions by the RBI can still support it short term, but in the long term, it might still be subjected to the pressure of depreciation as long as global uncertainties and trade-related issues are not solved.
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