The Indian Rupee (INR) has recently shown signs of recovery, appreciating by 10 paise to close at ₹85.03 against the US dollar on December 20, 2024. This recovery comes after the rupee hit an all-time low of ₹85.13 on December 19, 2024, driven by a softening US dollar index and potential intervention by the Reserve Bank of India (RBI) [3b21e546].
The Dollar Index (DXY) was trading lower by 0.14% at 108.26, with resistance expected near 110, amid reduced expectations for Federal Reserve rate cuts in 2025. The Fed had recently cut rates by 25 basis points on December 18, 2024, but guidance for the upcoming year has softened from four anticipated cuts to just two [3b21e546].
Despite this brief recovery, analysts caution that the rupee may continue to face pressure due to high dollar demand and ongoing foreign institutional investor (FII) outflows, which saw net sales of ₹4,224.92 crore on December 19, 2024 [3b21e546]. The market remains vigilant as rising crude oil prices, with Brent crude trading at $72.16 per barrel, could also impact the rupee's performance [3b21e546].
Earlier reports indicated that the rupee had reached an all-time low of ₹84.40 against the dollar on November 11, 2024, influenced by persistent foreign fund outflows and a strengthening dollar [68783c85]. The State Bank of India (SBI) had projected a potential depreciation of the rupee by 8-10% during the anticipated Trump 2.0 administration, reflecting concerns from the previous Trump term when the rupee depreciated by 11% [13a508da].
The RBI has been actively intervening in the currency market to stabilize the rupee, which has contributed to a decrease in India's foreign exchange reserves, now approximately $682 billion [68783c85]. Market indices had previously reflected the rupee's struggles, with the Sensex and Nifty indices experiencing declines [68783c85].
As the situation evolves, traders and analysts are closely monitoring these economic factors and their implications for both the domestic and global economic landscapes [2dc7b490].