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The Indian rupee has plummeted to a fresh record low against the US dollar, reaching 84.38 per dollar on Monday. This significant decline can be attributed to continued selling of Indian equities by foreign investors, who are increasingly wary of the economic outlook for India. The weakening rupee has exacerbated inflationary pressures and is likely to further dampen consumer sentiment.
Foreign investors have been pulling out money from Indian markets for several months now, driven by concerns over rising inflation, slowing economic growth, and global uncertainties. The recent spike in oil prices has added to these concerns, as it pushes up import costs and widens the current account deficit. As foreign investors withdraw their investments, the demand for the rupee weakens, leading to its depreciation against the dollar.
The Reserve Bank of India (RBI) has been intervening in the forex market to try and stem the rupee's fall, but its efforts have been largely ineffective. The central bank has been raising interest rates to tame inflation, but this has also slowed economic activity. The depreciating rupee is making imports more expensive, which could further fuel inflation and dampen economic growth.
The Indian government is facing mounting pressure to take steps to support the rupee and stabilize the economy. Policymakers are considering measures such as increasing import duties, promoting exports, and attracting foreign direct investment. However, these measures are likely to have limited impact in the short term, as the rupee's weakness is driven by global factors beyond India's control.
Source: Rupee hits fresh low of 84.38 per dollar as foreign investors sell equities