From November 13, 2014, to November 9, 2024
The Indian rupee (INR) has been weakening against the US dollar (USD) due to a combination of global and domestic factors, including:
1. Strong US Dollar: The US dollar has been strong globally, driven by the Federal Reserve’s interest rate hikes and robust US economic performance. Higher interest rates in the US make dollar-denominated assets more attractive, drawing investment away from emerging markets, including India, and increasing demand for dollars.
2. Trade Deficit: India has a trade deficit, meaning it imports more than it exports. This increases the demand for dollars for imports, weakening the rupee. India’s dependence on oil imports, whose volatile prices have contributed to this deficit.
3. Capital Outflows: When US interest rates rise, foreign investors often withdraw money from emerging markets like India and move it to the US. This outflow of capital results in greater demand for dollars, putting downward pressure on the rupee.
4. Global Economic Uncertainty: Geopolitical events, including the war in Ukraine and fears of a global recession, have led investors to seek the dollar as a “safe haven.” This trend has resulted in the depreciation of many currencies, including the rupee.
5. Domestic Economic Factors: While India has strong economic growth, inflation and high government debt levels can weigh the rupee. Inflation increases import costs, while high debt can deter foreign investors concerned about fiscal stability.
6. Market Sentiment: Expectations of the US Federal Reserve’s future policies and India’s monetary stance also affect market sentiment and currency rates.
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