India Rupee Falls Past 84 Per Dollar to Record Low Amid Outflows

The Indian Rupee (INR) has reached a new low against the US Dollar (USD), falling past 84 per dollar on Thursday, October 3, 2024. This marks a significant decline in the value of the Indian currency, raising concerns among investors and economists alike. The USDINR exchange rate decreased by 0.0062 or 0.01% to 83.9149 from the previous session's 83.9210.


Several factors contribute to the depreciation of the Indian Rupee. Foreign exchange reserves and capital outflows play a crucial role in influencing the USDINR exchange rate. A decrease in foreign exchange reserves or an increase in capital outflows can lead to a weaker Rupee, as seen in recent months. Additionally, geopolitical factors and global market sentiment can impact the Indian Rupee's exchange rate, making it more susceptible to fluctuations.

Interest rate differentials and inflation rates also play a significant role in the Indian Rupee's depreciation. Higher interest rates in the United States, coupled with relatively lower interest rates in India, can lead to capital outflows, as investors seek higher returns abroad. This, in turn, puts downward pressure on the Rupee's value. Furthermore, higher inflation rates in India compared to the United States can erode the purchasing power of the Rupee, contributing to its depreciation.


Foreign portfolio investments (FPIs) and foreign direct investments (FDIs) also contribute to the Rupee's depreciation. A decrease in FPIs and FDIs can lead to a reduction in foreign capital inflows, which can put downward pressure on the Rupee's value. Interest rate differentials can also attract or repel foreign capital, influencing the Rupee's exchange rate. Changes in the global economic outlook and risk sentiment can affect the flow of foreign capital into India, impacting the Rupee's value.

The Indian Rupee is expected to trade at 84.08 by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, the Rupee is estimated to trade at 84.87 in 12 months' time. However, these forecasts may be influenced by the Indian government's economic policies and fiscal management. The government's ability to address the factors contributing to the Rupee's depreciation will be crucial in determining the currency's future trajectory.

In conclusion, the Indian Rupee's depreciation to a record low against the US Dollar is a result of various factors, including foreign exchange reserves, capital outflows, interest rate differentials, inflation rates, and global market sentiment. The Indian government's economic policies and fiscal management will play a crucial role in determining the Rupee's future trajectory. Investors and economists alike should closely monitor these factors to assess the potential impact on the Indian economy and the Rupee's exchange rate.