The Indian rupee (INR) is once again grappling with turbulence, hitting a fresh low against the US dollar (USD) on Tuesday. At 84.92, the rupee finds itself in troubled waters amid rising speculation of rate cuts by the Reserve Bank of India (RBI). Combined with global factors, the INR is under immense pressureāhereās a quick breakdown of whatās happening.
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Why Is the Indian Rupee Losing Ground? š¤
1. Weak Indian Equity Markets š
The Indian stock market is showing signs of a slowdown, weakening investor sentiment. Foreign Institutional Investors (FIIs) are pulling out capital, intensifying the rupee's struggles. On Monday alone, FIIs offloaded shares worth ā¹278 croreāclearly signaling dampened confidence.
2. Decreased Exports & Rising Imports š
Exports Decline: Indiaās exports fell by 4.85% YoY in November, slipping to $32.11 billion.
Gold Imports Surge: Increased gold demand is placing more strain on the rupee. When imports rise faster than exports, Indiaās trade balance suffers, dragging the currency down.
3. Rate Cut Speculation by the RBI š¦
The RBI is rumored to be considering rate cuts. This speculation, alongside leadership changes, is creating uncertainty, further eroding investor confidence and hitting the rupee hard.
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The US Dollar Is Gaining Strength šŖ
Across the globe, the US dollar is enjoying a boost, driven in large part by political shifts in the United States. With Donald Trump set to take over in January 2025, the market anticipates aggressive economic policies that could strengthen the dollar further.
Trump has been vocal about protecting the USDās dominance, particularly against BRICS nations that are exploring alternatives. In a recent statement, he warned:
> āThe idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is OVER... They will face 100% tariffs and say goodbye to selling into the U.S. economy.ā
This firm stance, combined with investor confidence in Trumpās policies, is boosting demand for the greenback.
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What This Means for India š®š³
Investor Confidence: Global and domestic investors are watching closely. A weak rupee could push more FIIs to exit, further impacting Indian markets.
Inflation Risks: A falling INR makes imports (like crude oil) more expensive, increasing inflationary pressures.
Global Trade Challenges: If the US dollar continues its upward trajectory, Indiaās trade deficit could widen further.
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Key Takeaways šØ
The rupee hit 84.92 against the USD, its lowest level yet.
Weak equity markets, falling exports, and RBI uncertainty are pushing the INR lower.
Trumpās potential economic policies are strengthening the US dollar, creating global pressure.
As India navigates these challenges, the coming months will be critical. Will the RBI step in with decisive measures, or will the dollar
continue to dominate the currency market? Only time will tell.
