For the past nine months, we've been seeing headlines almost every day that the rupee has touched a new low. While the fall in the value of the Indian currency can be psychologically unsettling, it's important to put it into perspective and gauge its impact on your investment portfolio. In March, the rupee was at 82.77 to the US dollar. Currently, it is 85.25, a drop of about 3%. We will look at reasons for this depreciation, but what's important is that external situation, as measured by our current account deficit (CAD) and balance of payments (BoP), is under control.
In October and November, foreign portfolio investors (FPIs) were significant net sellers of Indian equities, which put pressure on the rupee and kicked off the latest phase of depreciation. This event must be seen in the context of global developments. To state the obvious, the strength of the US dollar impacts our currency, and the strength or weakness of the dollar is measured against a basket of six major currencies, referred to as DXY, with defined weights. The major impetus for DXY movement is interest rate changes, or expectations of such changes, by the US Fed.
This story is from the January 02, 2025 edition of Mint Bangalore.
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This story is from the January 02, 2025 edition of Mint Bangalore.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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