Mumbai: The Indian rupee recorded its biggest fall in history on Tuesday, plunging to an all-time low of 88.80 against the US dollar during intraday trade. The currency’s sharp decline surpassed the previous record set just last week, signalling intense pressure on the Indian economy.
The slide is being attributed primarily to ongoing trade tensions between India and the United States, which have fueled a surge in demand for the US dollar.
Although the rupee showed a marginal recovery in early trade on Tuesday, it quickly buckled under intense selling pressure. The Reserve Bank of India (RBI) reportedly intervened in the market by selling dollars in an attempt to cushion the fall, but these efforts were insufficient to stop the currency from hitting the new low.
Adding to the pressure, Foreign Portfolio Investors (FPIs) have continued their selling spree in the Indian stock market, further weakening the rupee. Market sentiment is also dampened by the lack of any significant progress on a new India-US trade agreement. The financial world is now anxiously awaiting the RBI’s policy announcement tomorrow to gauge its stance on interest rates and measures to stabilize the currency.
The rupee’s weakness is also seen in the context of broader economic challenges. As early as January this year, brokerage firm UBS Group had warned that India’s economy was entering a “structural slowdown.” It cited weak credit growth, a decline in Foreign Direct Investment (FDI), and a general deceleration in economic momentum as key underlying causes for concern.
