Rupee's Rollercoaster: Navigating Trade Turmoil and Capital Challenges

The Indian rupee faces depreciation amid global trade tensions and capital outflows. With plummeting FDI and an unstable balance of payments, the currency struggles against USD. RBI adapts flexible exchange rates while experts foresee potential recovery as capital inflows stabilize and macroeconomic fundamentals strengthen.

The Indian rupee is navigating through turbulent times as it grapples with global trade disruptions and significant foreign fund outflows. Despite strong domestic economic indicators, the rupee's descent persists, exacerbated by unresolved tariff impacts and trade negotiations largely with the US.

The depreciation saw the rupee falling nearly 5% this year, even breaching the historic 91-mark against the dollar. This slide, seen as a result of capital account imbalances, has positioned the rupee as the worst performer among Asian currencies. The Reserve Bank of India views its decline as a necessary adjustment to counteract global tariff shocks.

Experts point to the waning foreign direct investment as a critical factor, reducing the long-term dollar inflows and increasing reliance on more volatile portfolio investments. Analysts foresee the rupee reaching levels between 92-93 in the near term, though potential appreciation could emerge with better trade agreements and stabilized capital flows.

(With inputs from agencies.)