The Indian rupee (INR) has been facing depreciation against the US dollar (USD) in October 2024, with the exchange rate crossing 84.38. R. Madhusoodanan, a financial expert in Muscat, mentioned that the INR crossed 219 against one OMR on Friday, with exchange houses offering 218.80. This has benefited Indian NRIs and exporters, who are receiving higher value for money and merchandise. The depreciation of the rupee can be attributed to various factors such as the pullout by foreign institutional investors from Indian stock markets, tensions in the Middle East, and increased demand for forex from foreign banks and oil companies in anticipation of higher crude prices.
The recent depreciation of the rupee can also be linked to the victory of Donald Trump, the US Federal Reserve’s interest rate cut, and potential changes in US tax and trade policies. The Dollar Index, which measures the strength of the USD against a basket of currencies, has increased significantly. These factors could have significant impacts on global markets and lead to volatility in the Indian rupee, prompting the Reserve Bank of India (RBI) to intervene in the forex market to limit the fall. The country’s forex reserve, which was above $700 billion, fell to $682 billion as of November 1, 2024, according to RBI data.
Madhusoodanan suggested that Trump’s policies, including tax reforms and deregulation, are likely to boost US economic growth. This has led investors to prefer the US dollar over other currencies, especially Asian currencies. The interest rate cuts by the US Fed and the Bank of England may prompt the RBI to follow suit in the next policy review, affecting the trajectory of rupee volatility. He predicted that the INR may face further pressure in the coming days and could reach new highs by the end of March 2025.
Overall, the depreciation of the Indian rupee against the US dollar is a result of various global and domestic factors. The rupee’s value is influenced by geopolitical tensions, economic policies, and changes in interest rates. The current depreciation has benefited Indian NRIs and exporters but could have broader implications for the global economy. As the RBI intervenes to stabilize the rupee, investors and market analysts will closely monitor the situation for any further developments. The future trajectory of the INR will depend on how various factors, such as US economic policies and global market trends, unfold in the coming months.
