Post by : Bianca
Haleem
On Wednesday, the Indian rupee crossed the critical threshold of 90 per dollar, indicating rising pressures from sluggish trade and capital outflows. The currency initially plunged to a historic low of 90.14 before slightly rebounding to 90.00.
This downturn is attributed to ongoing challenges in India's economic landscape, with escalating trade deficits, a noticeable deceleration in nominal GDP growth, and diminishing foreign investments negatively impacting the rupee.
Furthermore, analysts highlight that ongoing trade disputes with the United States have intensified the rupee’s decline. India faces some of the steepest tariffs from the U.S. globally, and without progress in negotiations, the currency remains at risk.
Market observers note the Reserve Bank of India (RBI) is taking a cautious stance, implementing measures to stabilize the rupee without straining its resources too much, especially concerning its current forward contract holdings. While the RBI has substantial foreign reserves and increasing gold stocks to provide some stability, persistent foreign outflows could challenge its interventions.
Experts warn that the rupee's frailty might continue shortly. Although the potential for a favorable resolution in India-U.S. trade discussions could provide temporary relief, persistent structural issues in trade and capital movements will keep influencing the rupee. Seasonal factors and a possible dip in dollar strength next year might provide minor support, but the Indian currency market is expected to experience ongoing volatility.
As India navigates this turbulent currency climate, businesses and traders are closely tracking economic indicators, investment flows, and the status of international trade negotiations likely to impact the rupee's future performance in the upcoming months.
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