The Indian Rupee (INR) has recently fallen to a historic low of 90.42 against the U.S. dollar, reflecting a significant depreciation of 5% year over year. Analysts highlight that this decline is primarily driven by a soaring trade deficit, which has been exacerbated by a 50% tariff imposed by the U.S. on Indian exports. Consequently, demand for foreign currency has surged, placing additional pressure on the rupee's value.
In tandem with this trade imbalance, nearly $17 billion has been withdrawn by foreign investors from Indian equities this year, contributing further to the rupee’s weakened state. Experts suggest that the Reserve Bank of India (RBI) is adopting a more tolerant approach to the rupee's depreciation as it faces ongoing challenges. The central bank seems to be prioritizing the reduction of excessive volatility rather than maintaining a specific exchange rate, which may result in continued pressures on the currency.
Recent forecasts from India’s largest private lender predict that the rupee could decline to 92 against the dollar if a swift trade deal with the U.S. is not achieved, penetrating the psychological barrier and pushing the currency further south.
Current pricing shows the INR to USD at 0.011131, which is 1.4% below its three-month average, amid relatively stable trading patterns. Likewise, the INR to EUR is at 0.009559, also 1.4% below its average, and the INR to GBP is at 0.008353, down 1.3%. Conversely, the INR to JPY is slightly better off, trading at 1.7266, which is just 0.8% above its three-month average.
As the currency market continues to evolve, stakeholders are advised to closely monitor these developments and consider the potential implications for international transactions.
