Even as rupee closed a tad higher against US dollar on Tuesday, Finance Ministry told the Rajya Sabha that the Indian currency has declined over 1 per cent in January. It also said that the foreign exchange reserves with the RBI decreased by over $70 billion during last three months period of 2024.
After hitting an all time low of 87.28 during trading and closing at 87.18, the rupee ended higher at 87.07 per US dollar, compared with 87.1850 in the previous session, mirroring gains in regional currencies, although concerns over the US-China trade war kept investors on edge. Forex traders said the dollar index, which had surged past 109.88 level, retreated to 108 after Trump announced the temporary pause on tariffs on Mexico and Canada for 30 days.
Local and global factors
In a written, reply, Finance Minister Nirmala Sitharaman told the Rajya Sabha that the value of the rupee is market-determined, with no target or specific level or band. Various domestic and global factors influence the exchange rate of rupee, such as the movement of the dollar index, trend in capital flows, level of interest rates, movement in crude prices, current account deficit, etc.
Data accompanying the written reply showed that rupee depreciated to 86.53 on January 28, which is over 1 per cent lower, as against 85.61 on December 31. Sitharaman said since the commencement of the last quarter of 2024, ruppee along with other asian currencies depreciated against the dollar amid uncertainties surrounding results of US elections.
“INR has depreciated 2.9 per cent during this period, least among major asian currencies barring Hong Kong Dollar. South Korean Won, Indonesian Rupiah and Malaysian Ringgit depreciated by 8.1 per cent, 6.4 per cent and 5.9 per cent respectively in this period,” she said. Further, all G-10 currencies also depreciated during this period by more than 5.5 per cent with Japanese Yen, British Pound and Euro depreciating by 7 per cent, 6.6 per cent and 5.8 per cent respectively.
In another written reply, Minister of State in the Finance Ministry, Pankaj Chaudhary said that the Reserve Bank of India (RBI) monitors key developments across the globe which may have an impact on dollar-rupee exchange rate. Among others, it includes monetary policy actions of the major central banks, major economic data releases across the globe and their impacts, OPEC+ meeting decisions, tracking and analysing geo-political events, daily movements in G-10 and EME currencies, etc. RBI regulates the foreign exchange market with a view to ensure its orderly functioning and development and intervenes only to curb undue volatility in the rupee. “The forex exchange reserves with the RBI decreased from $705.78 billion as at end September 2024 to $635.7 billion as at end-December, 2024, mainly due to sale of foreign exchange by the RBI and revaluation losses of assets,” he said.
