In early trading on Wednesday, the Indian rupee marginally declined in value relative to the US dollar, closing at 85.6725 against the US dollar, down from 85.6150 at the close of the previous session. A major factor in the depreciation is the demand for dollars, primarily from importers.
The Indian rupee has been steadily declining in recent weeks due to a number of factors, including the continued strength of the US dollar and worries over India’s slowing economic growth.
The dollar index reached its highest level in more than two years on Tuesday, rising about 0.4% to 108.4. With little trading activity over the holiday, U.S. government yields also increased, with the 10-year U.S. Treasury yield moving up 3 basis points to 4.57%. The rupee’s decline, which is anticipated to continue in the foreseeable future, has been exacerbated by the U.S. dollar’s continued gain.
Dollar-rupee forward premiums, meanwhile, marginally declined from their highest points in more than a year and a half. The 1-year expected yield dropped 4 basis points to 2.50% as premiums increased due to an “unusual surge” in very near-dated dollar-rupee swap rates.
Despite the difficulties, the rupee’s outlook for early 2025 is still cautious, with experts keeping a careful eye on both domestic and international market events.
