Monday 03 / February / 2025
Muscat: The Indian rupee hit a record low on Monday and crossed 87 against the US dollar for the first time.
The exchange houses in Oman are offering 225.80 against one OMR. Speaking to Times of Oman, R. Madhusoodanan, a former SBI and financial expert based in Muscat said INR crossed 87.29 levels intra-day and closed at 87.1850.
The reasons for the fall are both domestic and international. Donald Trump’s announcements on higher tariffs on Mexico, Canada, and China triggered fears of a broad trade war.
Asian currencies also weakened due to this and INR is not an exception. The dollar index (DXY) surged to 109.88, indicating a strong US dollar scenario.
The Indian forex outflows continue, adding pressure on the rupee. Foreign institutional investors (FIIs) have been pulling out money from the Indian stock market due to the uncertainties in global trade and the spike in the Dollar Index. In January 2025 itself, the FIIs sold securities worth over 87,000 cores.
The forex reserve of India was over USD 700 billion in September 2024 and it has reduced to $ 624 billion now. In the past, RBI has been constantly intervening in the forex market to keep the rupee volatility marginal.
It is fact that the Indian Rupee has not disproportionately depreciated vis-av-vis other Asian currencies. The RBI policy review scheduled for next week may give directions to the rupee movements, in the short term horizon.
Madhusoodanan further said that the Indian diaspora and the exporters are happy over the depreciation of INR as they get more value for their earnings. The higher volatility in the INR is not good for the Indian economy as it has got far-reaching consequences on all key indicators of the economy.
The export reforms announced in the last Union Budget may positively impact the trade deficit of the country. It may not be wrong, if the government revisits the decision on the duty cut (BCD) on gold, platinum, and electronic goods announced in the interim budget (2024), to check the Current Account Deficit (CAD) of the country, Madhusoodanan said.
