INR vs USD: Rupee Hits Record Low as US Fed Signals Fewer Rate Cuts in 2025: Iranian currency also touched its record low after INR crossed the 85-per-dollar mark, as the US Fed signaled it would slow the pace of rate cuts in 2025.
This depreciation is in tune with the global mentality, and the external sector in India needs attention. The recently more hawkish stance within the FOMC has led to an appreciation of the US dollar because the yields on US Treasury bonds have also begun to rise. The nature and intensity of currency depreciation: where the signals of changing capital flows are ‘good’ or ‘bad’ fasten on emerging markets… India inclusive.
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The rupee can also be attributed to an expanding current account deficit arising from higher oil imports and low export demand globally. There are good and bad sides to India due to the depreciated value of the rupee. On the one hand, it motivates imports, especially crude oil, to be more expensive, increasing inflation and fiscal costs. It is worrying to the policymakers, especially when they are working towards ensuring that there is the engine of the economy.
On the other hand, import inflation can hurt the domestic industry because a depreciated rupee can benefit exporters, especially the IT and pharmaceutical industries. After all, it makes Indian IT and pharmaceutical goods cheaper in the world market.
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The RBI has probably intervened in forex markets to defend the rupee, but it needs to bear in mind both the foreign exchange reserves and the rupee itself. According to the analysts, policies involving structural adjustments, higher export diversification or improving export competitiveness, and greater emphasis on de-externalization could help provide immunity to such fluctuations in the future.
With the continuation of an unstable outlook for global monetary policies and all-round economic insecurity, the primary consideration regarding the fate of the rupee will be the determination of Indian macroeconomic policies and their success in attracting FDI despite all odds on global platforms. It is a call to action for both fiscal and monetary policymakers to wake up and get to work.
