December 26, 2024
New Delhi, India
Rupee Today
The Indian rupee continued its slide, hitting a fresh all-time low of 85.22 per US dollar on Thursday. Opening 2 paise weaker than its previous close of 85.20, the currency further declined by 3 paise during early trade, reflecting persistent depreciation driven by both global and domestic challenges.
Key Factors Behind the Rupee’s Decline:
- Global Influences:
- The dollar index remained firm at 108.15, bolstered by elevated U.S. inflation and geopolitical uncertainties.
- U.S. 10-year Treasury yields stood steady at 4.5940%, adding pressure on emerging market currencies.
- Brent crude traded at $73.36 per barrel, maintaining its weight on import-heavy economies like India.
- Domestic Challenges:
- Slowing FDI inflows and weak manufacturing exports are straining the rupee.
- A narrowing policy rate differential with the U.S. further compounds the pressure.
Outlook for 2025:
A report by Standard Chartered Bank projects the rupee to exhibit a modest depreciating trend, potentially reaching 85.5 per US dollar over the next 12 months. While India’s economic fundamentals remain strong, they may not entirely offset the headwinds.
Supportive Factors for the Rupee:
- Economic Resilience:
- India’s GDP growth and corporate earnings are expected to outpace global peers in 2025.
- Higher government capital expenditure and improved rural and urban demand are anticipated to drive recovery.
- Stable Forex Reserves:
- The Reserve Bank of India’s robust foreign exchange reserves provide a buffer against external shocks.
- Disinflationary Trends:
- Inflation is projected to ease due to better crop sowing and past policy measures reducing inflationary pressures.
Impact on Indian Equities:
The report highlights several positive drivers for Indian equities, including steady domestic inflows through SIPs, foreign investments, and superior macroeconomic fundamentals. Expected Federal Reserve rate cuts and a recovery in economic growth are also poised to support the equity market.
Despite ongoing challenges, India’s strong macroeconomic fundamentals and resilience underscore a positive long-term outlook. However, the rupee is likely to remain under pressure in the short term due to global uncertainties and domestic structural factors.
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