The Indian rupee’s slide to 84.50 against the US dollar is the result of several factors impacting its value:
Strengthening Dollar: The US dollar index, which tracks the dollar’s performance against a group of major currencies, has risen by 3.10% this month. This has bolstered the dollar’s value, making it stronger compared to the rupee.
Foreign Investor Outflows: Foreign Portfolio Investors (FPIs) have pulled out nearly 40,000 crore rupees from Indian stocks. This capital flight reduces demand for the rupee in global markets, adding downward pressure on its value.
Geopolitical Risks: Escalating geopolitical tensions have driven investors to seek safety in the US dollar, increasing its appeal while putting additional strain on emerging market currencies like the rupee.
On November 22, the Indian rupee dropped to a fresh low of 84.50 against the US dollar, weighed down by the dollar’s continued strength, consistent selling by foreign portfolio investors (FPIs), and rising geopolitical tensions. These elements collectively added significant strain on the domestic currency.
The dollar’s rise has been driven by solid US economic performance and remarks from Federal Reserve officials indicating that rate cuts are not a priority. As a result, the dollar reached a 52-week high of 107.18 this week, gaining more than 3.70% since Trump’s win on November 5.
Concerns about stretched valuations, underwhelming Q2FY25 earnings, and indications of a potential GDP slowdown in India during the same quarter have weighed on investor confidence. As a result, Foreign Portfolio Investors (FPIs) have withdrawn close to 40,000 crore rupees from Indian equities so far in November, according to Trendlyne data.
In October, Foreign Portfolio Investors (FPIs) extended their selling spree, unloading a record 1.14 lakh rupees crore worth of Indian shares.
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