New Delhi, Feb 3 (PTI) – The Indian rupee plummeted to a historic low of 87.29 against the US dollar on Monday, weighed down by persistent foreign fund outflows and global trade tensions. Despite the decline, Finance Secretary Tuhin Kanta Pandey assured that there is no cause for concern, emphasizing that the Reserve Bank of India (RBI) is effectively managing the currency's volatility.
"There is no concern about the value of the rupee. The volatility is being managed by the RBI," Pandey told reporters. He further reiterated that the rupee is a free-floating currency, meaning its value is determined by market forces rather than a fixed exchange rate.
Impact of Foreign Fund Outflows and Trade War Fears
The steep depreciation comes amid sustained foreign institutional investor (FII) outflows, coupled with strong global demand for the US dollar. FIIs offloaded equities worth ₹1,327.09 crore in the Indian capital markets on Saturday, according to exchange data.Additionally, fresh trade tensions have exacerbated pressure on the rupee. Former US President Donald Trump’s recent tariff hikes on Canada, Mexico, and China have sparked concerns of a potential global trade war. Under the new tariffs, Canada and Mexico face a 25% duty, while China has been hit with a 10% duty.
Rupee’s Decline in 2025
Since the beginning of 2025, the rupee has weakened by 1.8%, sliding from 85.61 per dollar on December 31, 2024, to its current level. Market experts attribute this depreciation to strong dollar demand from oil importers, reduced risk appetite among investors, and persistent outflows of foreign capital.Forex Reserves Show Uptick Amid Depreciation
Despite the rupee's slide, India’s foreign exchange reserves saw a boost, rising by $5.574 billion to $629.557 billion in the week ending January 24, according to the RBI. This follows a previous decline of $1.888 billion, reflecting the RBI’s interventions in the forex market to curb excessive volatility.The overall trend of declining forex reserves over recent weeks has been attributed to revaluation effects and active RBI measures to stabilize the rupee.
As global economic uncertainties persist, all eyes remain on the RBI’s next steps to navigate the ongoing currency fluctuations and foreign investment outflows.
