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Rupee At All-Time Low: A historic decline is being seen in the rupee and in the session of December 17, the value of the rupee against one dollar has come down to the level of Rs 84.93 for the first time, which had closed at Rs 84.87 in the previous session. The rupee has weakened by six paise in today’s session. After the ongoing weakness in the rupee against the dollar, it is now feared that the Indian currency may break the level of Rs 85 against the dollar.
Why did the rupee fall?
On Monday, December 16, 2024, the Commerce Ministry has released trade data regarding export-import. And according to this data, India’s trade deficit has come to an all-time low in the month of November. The trade deficit in November 2024 will be $37.84 billion, breaking all previous records. Due to the sharp increase in imports this month, the trade deficit has increased, while on the other hand, there has been a decline in exports.
There has been a record jump in gold imports in the month of November. Due to weddings and festive demand, India imported gold worth $14.8 billion in the month of November. Apart from this, imports of edible oil, fertilizers and silver have also increased due to which the trade deficit has increased and the rupee is having to bear the brunt of it.
How much more will the rupee fall?
Donald Trump will take oath as US President on January 20, 2025. Since his victory in the elections, the rupee has continued to fall against the dollar. The Dollar Index has strengthened since Trump’s victory and the dollar is likely to strengthen further after coming to power. The Trump government may impose heavy tariffs on foreign goods coming to America, which will make buying imported goods expensive. There is a risk of inflation increasing due to this. In such a situation, if the possibility of interest rates decreasing, the dollar may become stronger. Due to this, further weakness in the rupee can be seen.
Huge decline in foreign exchange reserves
To stop the weakness in the rupee, the Reserve Bank of India has been continuously selling dollars so that the rupee can be supported. RBI’s foreign exchange reserves have declined by about $50 billion since the week ending September 27, 2024. The main reason for this is the selling of foreign investors in the Indian stock market in the months of October-November, while the second big reason includes the dollars sold by the RBI to support the rupee.
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