Thursday, 11 Sep, 2025
By: Yash Gupte
The rupee depreciated by 8 paisa to 79.82 on Wednesday. Economic and financial experts had attributed the reason behind the rupee’s historic fall to the statement issued by the US Fed chief Jerome Powell in which he marked that the high bank rates in US will be continuing for some time for curbing the inflation in the country.
The Indian rupee created history in July’s last week when it touched the then historical low of ‘80’ per US dollar. It further dipped to the historical low of 80.13 against the US dollar in intra-day trade on 29th August 2022. The rupee depreciated by 8 paisa to 79.82 on Wednesday. Economic and financial experts had attributed the reason behind the rupee’s historic fall to the statement issued by the US Fed chief Jerome Powell in which he marked that the high bank rates in US will be continuing for some time for curbing the inflation in the country. Powell added that US needs to focus on price stability which will gradually lower the inflation.
The United States of America has been undergoing through inflation since long time. In august 2021, the inflation rate in US was 5.25%. The inflation rate soared to 8.26% in the previous month. This has forced the Central bank of US to increase the bank rate and stabilize the economy but this has made an adverse impact on the Indian currency. This year, US’s central bank has increased the interest rate by more than four times to control the worst inflation in 10 decades. Higher interest rates increases the opportunity cost of non-yielding assets resulting in high value of dollar. Keeping in mind the high inflation in the most advanced nations in the world, financial experts marked that the USD and INR will be trading between the range of 79.80 and 80.30.
In spite of rupee trading low for the fourth straight day against the US dollar, the rupee is not expected to fall beyond the mark of 80.50 as India has less rate of inflation when compared to other countries like USA and UK. To stop the rupee's decline, the Reserve Bank of India (RBI) and the Centre may implement a number of one-time measures. Import restrictions on non-essential items, lowered thresholds for cumulative abroad investments by resident Indians, and requirements for exporters to send USD payments more quickly are a few examples. The exchange rates of different currencies are changing constantly as banks, companies, and dealers buy and sell them in different time zones throughout the world.
Since the beginning of the year, the rupee has lost nearly 6.5% of its value. The decline is mostly attributable to increased crude oil prices, a strong foreign currency, and foreign capital outflows. Investors are abandoning risky Indian assets in favor of safe greenbacks as a result of a stronger dollar and gloomy local development expectations. With the US Federal Reserve tightening monetary policy, the US dollar has been rising as foreign investors rushed into the safe-haven currency. The outward flow of money from India results in the depreciation of rupee.
Rising imported inflation is the result of pressure from a declining rupee on already high import prices of petroleum and raw materials. Another factor contributing to the rupee's decline against the dollar is the trade deficit. The sharp increase in crude oil prices amid the Ukraine crisis has further weakened the rupee but experts believe that India’s strategy of purchasing more and more Russian oil at discounted price has kept the rupee stable as compared to other currencies.
