The Indian rupee has fallen to its lowest value on record against the US dollar, raising concerns among economists and financial analysts. On Monday, January 13, the rupee closed at 86.5750 per dollar after hitting an intraday low of 86.5825, according to The Economic Times. This marks the currency’s steepest decline since February 2023 and continues a prolonged downward trend over the last three months.
The rupee’s depreciation is driven by several interrelated factors. A primary contributor is the rising cost of crude oil in the international market. As India is a major importer of crude oil, the increase in prices has significantly inflated the country’s import bills, placing additional pressure on the currency. Meanwhile, foreign investors have withdrawn over $4 billion from India’s equity markets this month, compounding the rupee’s struggles.
Global economic uncertainty has also played a role in the currency’s decline. Market concerns surrounding the policy direction of newly elected U.S. President Donald Trump have introduced heightened volatility, negatively affecting emerging market currencies like the rupee.
Analysts predict the rupee may weaken further, with some forecasting it could drop to 87 against the dollar by the end of March. Such a development could have widespread implications, as a weaker rupee makes imports more expensive, potentially driving up inflation and increasing the cost of living for Indian consumers.
In response, the Reserve Bank of India (RBI) has taken steps to stabilize the rupee. However, the effectiveness of these measures may be limited by ongoing global economic pressures and domestic challenges.
The rupee’s continued depreciation underscores the need for swift and strategic action to restore investor confidence and strengthen India’s financial resilience. Addressing these economic headwinds will be critical to mitigating the long-term effects of this historic downturn.