Indian Currency Falls, RBI takes a big decision
The Indian rupee has seen a significant decline this year. Continued selling by foreign investors and a number of other economic factors have led to a historic low against the US dollar, crossing 90. The rupee has depreciated 4.9 percent so far this year, making it the third-worst performing currency among 31 major currencies.
However, the Turkish lira and the Argentine peso have fared even worse. Significantly, this decline is occurring at a time when the dollar’s strength has declined by 70 percent.
There are several major reasons behind the rupee’s decline. The widening trade deficit, heavy tariffs of up to 50 percent on Indian products, and the outflow of foreign capital from the country are the main reasons. The failure to reach an agreement with the Trump administration is also putting additional pressure on the Indian currency. Despite crossing the 90 mark, the rupee remains under constant pressure, and its value has fallen by almost half compared to 2011. This situation has posed a major challenge for RBI Governor Sanjay Malhotra, who is striving to maintain the rupee’s stability.
The Reserve Bank is employing several strategies to stem the rupee’s decline. According to a Bloomberg report, the RBI issues confidential directives to rupee traders, which can include various strategies daily—from selling $100 million every minute to extensive intervention. The RBI’s objective is to control excessive volatility and speculation in the rupee, not to aggressively influence the market.
