Indian Rupee: The rupees breached the 94-mark for the first time, closing at 94.81 against the dollar. Earlier in the session, it had touched a record low of 94.84. Since late February, the currency has depreciated by nearly 4%, and by 11% in the current fiscal year, marking its worst annual performance in over a decade.
Many analysts anticipate that oil prices will remain above $100 per barrel for several weeks, thereby driving up the import bill and inflation. Dealers noted that the pressure on the Indian rupee stems more from heavy selling by foreign investors than from the conflict in West Asia; foreign investment outflows this month have already crossed the $13 billion mark, an all-time high.
Indian Rupee: Pressure on the Rupee is Driven More by Heavy Selling by FIIs
The pressure on the Indian rupee is driven more by heavy selling by FIIs (Foreign Institutional Investors), which has already exceeded $13 billion this month, than by the ongoing conflict in West Asia. Domestic equity markets witnessed a sharp decline, while benchmark bond yields surged to multi-month highs, reflecting tightening financial conditions.
Amid growing concerns regarding inflation, currency weakness, and external imbalances, foreign investors have begun rapidly withdrawing their capital from domestic equities and bonds.
Growth forecasts have been downgraded, while expectations of interest rate hikes in the coming year have strengthened further. The government has cut excise duties to keep fuel prices in check; however, this move is expected to exert pressure on the fiscal deficit and lead to increased borrowing.
Despite some signs of easing tensions, the currency remains under pressure due to persistent global uncertainty. Jatin Trivedi, an analyst at LKP Securities, stated, “The Indian Rupee is expected to trade within a weak range of 93.25-94.25, and a bearish trend is likely to persist until there is visible progress in the Iran peace negotiations.”
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