The Indian rupee dipped to its lowest price point against the US dollar in the currency markets on Monday. The INR fell to an all-time low of 84.92 and is now a stone’s throw away from plummeting to 85. The DXY index, which tracks the performance of the US dollar, shows the currency touching the 107.03 mark. It had reached a 52-week high of 108.07 and could reclaim its lost territory if it holds on to the momentum.
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Confidence in Trump is boosting the US dollar while other local currencies, including the Indian rupee, are taking a beating. Several financial analysts indicate that the INR could fall below 85 due to weak economic cues. The Reserve Bank of India (RBI) is also unable to tame the fall of the INR despite accusations of selling the US dollar in the open markets.
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Why Is the Indian Rupee Falling Against the US Dollar in the Currency Markets?
The rising crude oil prices and the exit of foreign institutional investors (FII) in the equities market are weakening the Indian economy. In the last three months alone, a record $12 billion worth of equities have been offloaded by foreign institutional clients. The move weakens the Indian rupee as the US dollar flexes its muscles in the currency markets.
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The development made Sensex dip from a high of 85,000 to a low of 78,000. However, the index managed to reclaim the 81,000 mark during Monday’s trade. The RBI now remains vigilant and is closely monitoring the Indian rupee’s lackluster performance against the US dollar. The central bank has been previously accused of interfering in the currency market by dumping the US dollar to protect the rupee.
The Indian rupee is projected to lose further value against the US dollar on the heels of Trump’s inauguration. Trump has vowed to maintain the US dollar’s supremacy and punish the countries that plan to cut ties with the greenback. The threats include a 100% tariff on all goods entering the US for trade.