Rupee Hits Historic Low, ₹85 Against US Dollar

Aakhir Tak – In Shorts

• The rupee hit a historic low of ₹85 against the US dollar.
• Federal Reserve signals fewer rate cuts, boosting the dollar.
• Weak capital inflows and slowing economic growth add pressure.
• Other Asian currencies also saw significant declines.
• Analysts predict increased volatility in 2025 despite RBI efforts.

Aakhir Tak – In Depth

Why Did the Rupee Fall to ₹85?

On Thursday, the Indian rupee touched ₹85.0650 per US dollar, its lowest level ever. The decline was driven by the US Federal Reserve’s decision to cut interest rates by 25 basis points and indicate only two rate cuts in 2025.

Economic Challenges and Capital Flows

India’s economic growth slowed to its lowest in seven quarters, while the trade deficit widened. Weak capital inflows exacerbated the pressure on the rupee.

Impact on Asian Currencies

The rupee’s decline mirrored trends in other Asian currencies. The Korean won, Malaysian ringgit, and Indonesian rupiah dropped by 0.8%-1.2% following the Fed’s announcements.

The Federal Reserve’s Role

Fed Chair Jerome Powell remarked, “From here, it’s a new phase, and we’re going to be cautious about further cuts.” This strengthened the dollar while weakening emerging market currencies.

RBI’s Intervention and Future Outlook

Despite regular interventions by the Reserve Bank of India, experts believe 2025 may bring increased volatility. Akshay Kumar of BNP Paribas noted, “In the short term, USD/INR pressure will persist.”

Aakhir Tak – Key Takeaways to Remember

• Rupee reached an all-time low of ₹85 against the US dollar.
• Federal Reserve decisions and dollar strength were major contributors.
• Weak capital inflows and economic slowdown added to the challenges.
• Analysts foresee heightened volatility in the coming years.

Aakhir Tak Editor-in-Chief

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