The Crossbill News Desk
The Indian rupee hit a historic low against the US dollar on Thursday (December 19), plunging to 85.0650 in early trade, a drop from 84.9525 on Wednesday.
The rupee’s slide from Rs 84 to Rs 85 occurred within just two months, compared to the 14 months it took to decline from Rs 83 to Rs 84, and 10 months for the move from Rs 82 to Rs 83.
The recent decline follows the US Federal Reserve’s decision to cut key interest rates by 25 basis points while signalling fewer rate cuts in 2025. The Fed’s updated guidance, reflected in its "dot plot," now forecasts only two rate cuts in 2025, half the number previously anticipated in September.
The revised outlook has strengthened the US dollar, further pressuring the rupee and other Asian currencies, including the Korean won, Malaysian ringgit, and Indonesian rupiah, which fell by 0.8%-1.2% during the same day.
Multiple global and domestic factors have contributed to the rupee’s weakening. India’s economic growth slowed to a seven-quarter low during the July-September period, while the merchandise trade deficit continues to widen.
Additionally, capital inflows into the country have remained subdued, exacerbating the rupee’s challenges.
The persistent strength of the US dollar, driven by expectations of robust US economic policies, has also added to the rupee’s troubles.
The Federal Reserve’s latest stance is expected to bolster the greenback’s value further. Domestically, India’s slowing economic growth has fuelled speculation that the Reserve Bank of India (RBI) might consider rate cuts soon, creating additional downward pressure on the currency.
Investors have responded to the rupee’s challenging environment by increasing short positions on the currency to a two-year high, according to a recent Reuters poll.
The rupee has weakened by 2% so far this year, positioning it mid-pack among Asian currencies in terms of performance.
Despite routine interventions by the Reserve Bank of India to stabilize the currency, analysts predict that the rupee’s relative stability of recent years may not persist in 2025.
The combination of global headwinds and domestic economic challenges is likely to keep the rupee under pressure in the near future.
The rupee’s slide from Rs 84 to Rs 85 occurred within just two months, compared to the 14 months it took to decline from Rs 83 to Rs 84, and 10 months for the move from Rs 82 to Rs 83.
The recent decline follows the US Federal Reserve’s decision to cut key interest rates by 25 basis points while signalling fewer rate cuts in 2025. The Fed’s updated guidance, reflected in its "dot plot," now forecasts only two rate cuts in 2025, half the number previously anticipated in September.
The revised outlook has strengthened the US dollar, further pressuring the rupee and other Asian currencies, including the Korean won, Malaysian ringgit, and Indonesian rupiah, which fell by 0.8%-1.2% during the same day.
Multiple global and domestic factors have contributed to the rupee’s weakening. India’s economic growth slowed to a seven-quarter low during the July-September period, while the merchandise trade deficit continues to widen.
Additionally, capital inflows into the country have remained subdued, exacerbating the rupee’s challenges.
The persistent strength of the US dollar, driven by expectations of robust US economic policies, has also added to the rupee’s troubles.
The Federal Reserve’s latest stance is expected to bolster the greenback’s value further. Domestically, India’s slowing economic growth has fuelled speculation that the Reserve Bank of India (RBI) might consider rate cuts soon, creating additional downward pressure on the currency.
Investors have responded to the rupee’s challenging environment by increasing short positions on the currency to a two-year high, according to a recent Reuters poll.
The rupee has weakened by 2% so far this year, positioning it mid-pack among Asian currencies in terms of performance.
Despite routine interventions by the Reserve Bank of India to stabilize the currency, analysts predict that the rupee’s relative stability of recent years may not persist in 2025.
The combination of global headwinds and domestic economic challenges is likely to keep the rupee under pressure in the near future.
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