Indian rupee touched an all-time low against US dollar. At the time of filing this report, the rupee was trading at 86.40 against US dollar.
Experts say the volatility trends show that the rupee will drop to 87 by March end.
“As per implied volatility trends, there are 80 per cent odds that the currency will drop to 87 between now and March-end, up from 27 per cent a month ago.” says Akshay Chinchalkar, Head of Research, Axis Securities.
Akshay adds that rising treasury yields and surge in crude prices has dampened the outlook for the Indian currency. The rupee has dropped for 16 straight weeks, which has never occurred in its history.
“India’s Rupee slumped beyond 86 this morning as a global dollar advance fueled by rising treasury yields and a surge in oil further dampened the outlook for the rupee. Offshore markets continue to bet against the rupee via options, where dollar-rupee out-of-the-money calls have been traded aggressively last week. The rupee has now dropped for 16 straight weeks, which has never occurred in its history,” he said.
Ajay Bagga Banking and market expert disagrees and says, rupee is facing pressure in line with other global currencies. In 2024, it has performed better than other emerging markets (EMs)
“The Rupee is facing pressure in line with other global currencies. In CY2024 the rupee was a relative outperformer versus other EMs. In 2025 we are seeing the continuation of US economic and bond yield exceptionalism which is leading to further strength in the US dollar and global currencies weakness.” said Ajay Bagga Banking and market expert
Indian rupee has been under pressure since last few months due to various domestic as well as international factors. These include India’s sluggish growth, outflows by foreign investors from Indian equities, and the strengthening of the dollar index after Donald Trump announced tariff plans, among others.
US dollar index rises to 109.98, highest since November 2022. Bagga said U.S. exceptionalism and EMs devaluing their currency to keep export competitiveness are reasons for rupee weakness.
“This US exceptionalism is the main reason for rupee weakness. Moreover, there is competitive devaluation as well, as to keep export competitiveness, EMs try to keep their currencies in a broad band with respect to export competitors, China for example used currency depreciation as a strategy in 2018 to counter Trump tariffs. India has to be a market follower in this scenario to keep its exports competitive” said Bagga
FPIs pulling out funds from the Indian markets is also putting pressure on rupee. (ANI)
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