The Indian rupee recorded its steepest single-day decline in six months, depreciating to a record low against the United States dollar, posing fresh challenges for policymakers in controlling inflation. Notably, India’s central bank, the Reserve Bank of India (RBI), has made significant efforts to bring retail inflation (measured by the Consumer Price Index or CPI) within its upper band of 6 percent while aiming to further reduce it to 4 percent.
Market sentiment
On Friday, the rupee plunged to an all-time low of 85.81 against the greenback during intraday trading, marking a decline of 55 paise per dollar. Despite the RBI’s intervention through adequate release of US dollars to stabilize the market, the rupee continued its downward trend, driven in part by persistent outflows of foreign funds. The Indian currency eventually settled at 85.54 a dollar, the lowest closing level on record. On Thursday, the rupee had opened at 85.32 a dollar and closed at 85.26, highlighting the significant depreciation within a single trading session.
“On Friday, the Indian rupee declined to a new all-time low, closing at 85.54 against the US dollar after steep decline to 85.80 level in the intraday trading session. This marks the third consecutive session where the rupee has reached record lows, driven by a firm United States dollar and increased demand from importers at the month’s end. Several factors contributed to the rupee’s depreciation include widening trade deficit, capital outflows, and global economic uncertainty,” said a report from AnandRathi Investment Services.
