Rupee Weakens To 95 Against US Dollar

Continued Decline Despite RBI Measures

  • The Indian Rupee keeps decreasing in value against the United States Dollar. The exchange rate crossed the 95 level for the first time. The price reached 95.22 during intraday trading.
  • The Reserve Bank of India (RBI) took action to stop the decline but the decline continued. The currency has faced ongoing downturn since tensions escalated in West Asia.
  • The Rupee has dropped approximately 4.1 percent since the conflict began in the region. The exchange rate already dropped to 94.82 on March 27 and it has maintained this continuous decline since then.

RBI Regulations and Market Reaction

  • The RBI implemented new bank rules to stop the currency from decreasing further.
  • Banks must limit their open positions to $100 million. The onshore forex market must follow this rule. The rule will take effect from April 10.
  • The Rupee experienced a short recovery after the announcement.
  • The currency improved by 128 paise. The currency reached 93.57 during initial market hours.
  • The recovery period ended shortly afterward. The Rupee lost value again throughout the day and reached above 95.

Key Reasons for the Rupee’s Fall

1. Rising Crude Oil Prices

Geopolitical tensions have led to increased global oil prices.

  • Brent crude oil is trading near $115 per barrel.
  • Higher oil prices increase India’s import costs.

India depends heavily on oil imports. When prices rise, the demand for dollars increases. This puts pressure on the Rupee.

2. Weak Export Performance

Export activity has decreased during the last few months.

  • The country earns less foreign currency because of lower export activity.
  • This situation results in an expanded current account deficit.

The increased deficit causes the Rupee to lose value against the dollar.

3. Foreign Investment Outflows

Foreign investors are pulling money out of Indian markets.

  • The outflow of funds decreases the demand for the Rupee.
  • Investors move their money to markets that offer better security and stability.

This movement adds further downward pressure on the currency.