The Indian rupee declined by 12 paise on November 27, 2024, closing at 84.45 against the US dollar. Over the last six months, the rupee has depreciated by 1.6%, making it the second worst-performing currency in Asia after the South Korean won, which fell by 2.1% during the same period.
Rupee’s Performance Over the Year
Record Lows: The rupee hit an all-time low of 84.50 on November 21, 2024, continuing its trend of weakness seen throughout 2023, where it declined by 0.6%.
Frequent Drops: In the past year, the currency has experienced single-day drops of 12 paise or more on 20 occasions, with the steepest fall of 38 paise recorded on June 4, 2024.
Pressure Points: Escalating geopolitical tensions, particularly between Russia and Ukraine, coupled with persistent foreign fund outflows, have exacerbated the rupee’s decline.
Global and Domestic Influences
Strengthening Dollar:
The dollar index, which tracks the greenback against six major currencies, surged nearly 6% over the last two months.
Policies by President-elect Donald Trump, including proposed tariffs, have further bolstered the dollar.
Foreign Fund Outflows:
Foreign portfolio investors (FPIs) withdrew $1.5 billion from Indian equities in November alone, following an $11 billion outflow in October.
Barclays estimates that for every $10 billion withdrawn from the Indian stock market, the rupee loses approximately 0.5% against the dollar.
Regional Comparison
Worst Performers:
The South Korean won led the decline, followed by the Indian rupee.
The Taiwan dollar and Philippine peso also saw declines of about 1% each.
Best Performers:
The Thai baht and Malaysian ringgit appreciated by 6% in the same period.
The Japanese yen gained 3.6%, showcasing resilience among select Asian currencies.
Outlook for USD/INR
Market participants anticipate further weakness in the rupee. According to Barclays:
Short-Term Forecast: USD/INR is projected to reach 84.7 by the end of 2024.
Long-Term Forecast: The exchange rate may rise to 87.0 by late 2025.
Conclusion
The Indian rupee’s continued decline reflects both global and domestic challenges, including a strong US dollar, foreign fund outflows, and geopolitical uncertainties. While regional currencies like the Thai baht and Japanese yen show strength, India’s currency faces persistent headwinds. Investors and market participants should closely monitor these trends as they shape the rupee’s trajectory in the months .
