The Indian rupee fell for the 10th consecutive week, hitting a record low of 85.97 to the dollar on Friday (January 10).
The rupee closed slightly higher at 85.9650, but its persistent slide has raised concerns. The currency has weakened 0.2 per cent this week– its worst performance in recent years as investors grapple with capital outflows and a strengthening US dollar.
The development comes amid a strenghtening US dollar as well as uncertainty over potential economic policies from former US President Donald Trump weighing on global markets.
India’s foreign exchange reserves also declined for the fifth straight week, falling to $634.59 billion as of January 3, a 10-month low, according to data from the Reserve Bank of India (RBI). Reserves dropped by $5.7 billion last week and are now $70 billion below their peak of $704.89 billion in late September.
The fall in reserves reflects the RBI’s substantial intervention in the forex market to limit the rupee’s losses. Analysts at Nomura warned that such interventions have led to tighter banking system liquidity and higher short-term interest rates, compounding the impact of India’s slowing economic growth.
They added that market participants may be engaging in “dollar hoarding” in anticipation of further rupee depreciation.
Concerns have also grown about the potential ripple effects of Trump’s recent comments on trade and economic policy, which could lead to increased volatility in emerging markets like India.
The RBI has reiterated its commitment to managing “undue volatility” in the currency markets while maintaining adequate reserve levels. However, with the rupee under pressure and reserves shrinking, questions remain about how long India can sustain its current strategy without further disruptions to its financial system.
With inputs from agencies
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Rupee falls for 10th straight week, hits all-time low amid uncertainty over Trump impact
