Compounding the Rupee’s woes is the sharp rise in crude oil prices, which has placed further strain on India’s current account
The Rupee pierced the psychologically crucial 86 to the Dollar mark on Monday, opening at an all-time low of 86.20 amid a strengthening US Dollar, rising global crude oil prices and falling domestic equity markets.
The Indian unit is currently trading at 86.40 per USD, per CCIL website. It had closed at 85.96 per USD last Friday.
Amit Pabari, MD, CR Forex Advisors, observed that the sustained decline of the Rupee reflects a combination of global and domestic pressures.
“Global factors such as the US dollar continues its upward march, driven by the Federal Reserve’s cautious stance and solid economic data….This has, in turn, pushed US 10-year yields higher, triggering capital outflows from emerging markets like India.
“The ripple effect has been significant, with approximately $4.2 billion exiting Indian markets in January 2025 alone.” Pabari said.
Compounding the Rupee’s woes is the sharp rise in crude oil prices, which has placed further strain on India’s current account. As a net importer of oil, India faces heightened fiscal stress whenever crude prices surge, weakening the Rupee’s resilience, he said.
“Amid the challenges, anticipated capital inflows offer a ray of hope. The Shapoorji Pallonji Group is set to raise up to $3.25 billion, while Tata Capital and IIFL Finance are expected to bring in $300 million each. Additionally, Vedanta Resources plans a $500 million fund raising,” Pabari said.
Moreover, a potential $3-4 billion inflow from Bloomberg index inclusion could provide much-needed support to the Indian Rupee.
Source: www.thehindubusinessline.com