MUMBAI: The Indian rupee hit a historic low on Monday, sliding to 85.84 against the US dollar during intraday trading, surpassing its previous record low of 85.81 recorded in December. The rupee ended the day slightly improved at 85.83, six paise weaker than Friday’s close of 85.77.
The fall in the rupee was attributed to a combination of factors, including a stronger US dollar in global markets, subdued capital inflows, and weak investor sentiment in domestic equity markets. The persistent strength of the US dollar, driven by expectations of higher interest rates from the Federal Reserve, has put emerging market currencies under pressure.
Market experts also pointed to muted foreign direct investment inflows and outflows from the equity and bond markets as contributing factors. The decline in domestic equities further added to the rupee’s woes, reflecting cautious investor sentiment amidst global uncertainties.
Analysts believe that the currency could face continued downward pressure if the current trends persist. A weaker rupee increases the cost of imports, particularly crude oil, which can further impact inflation and the country’s fiscal health.
While the Reserve Bank of India (RBI) has been intervening in the forex market to stabilize the rupee, it has allowed the currency to find its natural level to some extent, keeping inflation and growth in focus.
The Indian economy now faces the challenge of balancing currency stability while maintaining its growth trajectory, as global economic conditions remain volatile.
