On Monday, the Indian rupee plunged to an unprecedented low at the market’s opening, triggered by escalating concerns that the risk aversion sparked by fears of a U.S. recession could result in foreign capital outflows. The rupee commenced trading at 83.78 against the U.S. dollar, down from its previous close of 83.75, and breached its previous all-time low of 83.7525, which had been reached just the previous Friday.
The decline in the rupee’s value is closely linked to the broader selloff observed in U.S. and Asian stock markets, which followed a disappointing jobs report. This negative economic indicator has intensified worries that international investors might withdraw funds from India and other emerging markets in search of safer assets.
Given the sharp depreciation, there is speculation that the Reserve Bank of India (RBI) may allow the USD/INR exchange rate to increase further, possibly reaching 83.90. A trader from a public sector bank commented, “The sharp selloff may prompt the Reserve Bank of India to let USD/INR move higher to 83.90.”
As the rupee continues to weaken, the possibility of continued foreign outflows and further depreciation remains a significant concern for investors and policymakers alike.
