The Indian rupee fell by 16 paise and closed at 85.58 against the US dollar. This decline happened because of concerns about global bond yields and ongoing outflows of foreign capital.
In the latest trading session, the rupee’s value dropped to 85.58 against the US dollar. This continues a trend of weakening for the Indian currency. The main reasons are rising global bond yields and steady withdrawals of foreign investments.
Experts say that this decline is the result of global financial uncertainty and pressure within the Indian economy. Higher US treasury yields, driven by expectations of lasting high interest rates in the US, make dollar assets more attractive.
Factors Contributing to the Depreciation of the Rupee
Investors have retreated from riskier assets due to the recent increase in US bond yields. As investor risk tolerance changes, pressure is mounting on the rupee and other developing-market currencies.
Indian stocks and bonds were recently sold off by foreign investors. As a result, the stability of the rupee has declined.
The rising US Dollar Index suggests that the dollar is getting stronger overall. As the value of the dollar increases, many other currencies, especially the Indian rupee, tend to depreciate.
Growing global crude oil prices have increased demand for dollars among companies that purchase oil, which has put pressure on the currency and widened India’s trade imbalance.
RBI’s Likely Intervention
While the RBI has so far refrained from aggressive intervention, market participants believe that any sharp depreciation may prompt the central bank to step in to stabilize the currency. The RBI plans to use its large foreign exchange reserves to reduce extreme fluctuations in the currency market.
Outlook for the Rupee
Until international interest rates level off and foreign investment starts up again, the rupee is anticipated to continue under pressure. The Federal Reserve’s interest rate plans and incoming US economic data are being closely watched by traders as they could have a big effect on the dollar-rupee exchange rate.
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