Why is the Rupee Declining Amid Weak Global Signals?
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Synopsis
The recent plunge in the rupee against the US dollar raises concerns among investors. As it hits a record low, experts anticipate potential recoveries in the future. Understanding the factors behind this decline is essential for investors navigating the financial landscape.
Key Takeaways
- Rupee hits a record low at 90.56 against the US dollar.
- Pressure due to uncertainties in the India-US trade deal.
- High demand for dollars from importers affects the rupee.
- Equity markets show resilience despite currency pressures.
- Experts predict potential strength in the rupee moving forward.
Mumbai, Dec 12 (NationPress) The rupee has dropped to an unprecedented low during early trading on Friday, decreasing by 24 paise to reach 90.56 against the US dollar.
This decline is attributed to ongoing uncertainties surrounding the India-US trade agreement and persistent foreign fund outflows, which have negatively impacted market sentiment.
Forex traders indicate that the rupee's depreciation is largely due to intense dollar purchases by importers, driven by rising global prices of precious metals.
The heightened demand for the US currency is contributing to the pressure on the rupee.
At the interbank foreign exchange market, the rupee commenced trading at 90.43 against the dollar before dropping to 90.56.
This represents a 24-paise decline from Thursday’s closing figure. Previously, the rupee had already fallen by 38 paise to finish at a then-record low of 90.32.
Looking forward, analysts predict that the Indian Rupee could regain strength.
“We anticipate that the INR will stay below 90 per dollar for the remainder of 2025 and strengthen through 2026, potentially reaching around 86 per dollar by year-end,” they noted.
While a weaker rupee may benefit export-driven sectors such as IT, pharmaceuticals, and textiles—especially as certain parts of India’s export portfolio face pressure from high US tariffs—it also raises alarms regarding imported inflation,” experts commented.
Nonetheless, today’s positive equity performance suggests that the market may be temporarily distancing itself from currency pressures, focusing instead on technical resilience.
Meanwhile, the dollar index, which gauges the US dollar's strength against six major currencies, marginally increased by 0.02 percent to 98.37.
Brent crude prices exhibited a rise, trading at USD 61.69 per barrel, reflecting an increase of 0.67 percent in futures trading.
Despite the rupee's weakness, domestic equity markets remained in positive territory. The Sensex climbed by 170.40 points to reach 84,988.53, while the Nifty gained 98.40 points to settle at 25,996.95.
Foreign Institutional Investors continued to withdraw capital, offloading equities valued at Rs 2,020.94 crore on Thursday, as per exchange data.
Point of View
I believe it's crucial to remain informed about the rupee's fluctuations. While the current decline is concerning, it also presents opportunities for export-oriented sectors. Our focus should be on understanding these market dynamics to prepare for future changes.
NationPress
13/12/2025
Frequently Asked Questions
What caused the recent decline in the rupee?
The rupee's decline is primarily due to uncertainties surrounding the India-US trade deal and continued foreign fund outflows.
How does a weaker rupee affect the Indian economy?
A weaker rupee can support export-oriented sectors but raises concerns about imported inflation.
What are the predictions for the rupee's future?
Experts predict the rupee may strengthen, potentially falling below 90 per dollar by the end of 2025.
How are equity markets responding to the rupee's decline?
Despite the rupee's weakness, domestic equity markets showed resilience, with the Sensex and Nifty trading positively.
What impact do foreign institutional investors have on the rupee?
Foreign Institutional Investors withdrawing funds can exacerbate the rupee's decline, as seen with recent equity sell-offs.
