Rupee Slips to 87.34 per Dollar: Causes and Impact
Why in the news
The Indian rupee weakened to a two-week low, ending the session at 87.34 per US dollar, a fall of 0.52% from the previous close.
Key facts
- Previous close: 86.88; new close: 87.34 (down 0.52%).
- Heavy demand for dollars in the NDF market (non-deliverable forwards), with $34 billion of maturities against the rupee.
- The rupee became the worst-performing Asian currency.
- The RBI stepped in during the morning around 87.30-87.35 to curb volatility, but no intervention was seen later in the day.
Global factors
| Factor | Effect |
|---|---|
| Dollar index near 103.7 (4-month low) | Reflected soft U.S. employment data and geopolitical uncertainty |
| Offshore Chinese yuan down 0.2% | Deflation worries in China weighed on Asian currencies |
| Possible U.S. retaliatory tariffs on Indian imports | Adds downside risk |
Impact
- A weaker rupee makes imports such as crude oil costlier, raising inflation worries.
- Continuous FII outflows cap any rupee recovery in the near term.
- Persistent volatility would prompt stronger RBI action.
Outlook
- RBI intervention could steady the rupee if global risk appetite improves.
- U.S. trade policy and FII flows will decide the rupee’s path in coming weeks.
Exam angle
- NDF: a forward contract settled without physical delivery of the currency.
- Rupee closing level: 87.34 per dollar.
- Regulator that intervenes in forex: Reserve Bank of India.