Rupee Weakens to Nearly 86 per Dollar
In a concerning turn of events, the Indian rupee has taken a significant hit, nearing the 86 per dollar mark, marking its tenth consecutive week of decline against the greenback. The local currency closed at 85.97 against the dollar, down 12 paise from its previous close of 85.85. This rapid depreciation of the rupee has left experts and investors alike on edge, with fears of breaching the pivotal 86 level on Monday looming large.
Experts Weigh In on Economic Implications
Renowned banker Uday Kotak expressed his concerns over the situation, citing the recent surge in the dollar index following the robust US non-farm payroll data. With the US job growth surpassing expectations and unemployment plummeting to 4.1%, investors are turning towards safer assets like US bonds, with yields reaching 4.77%. This shift in investment behavior poses a significant challenge for emerging markets like India, necessitating a careful management of external accounts to mitigate the impact of these global economic changes.
RBI’s Efforts and Declining Forex Reserves
Despite the Reserve Bank of India’s efforts to defend the rupee, the country’s foreign exchange reserves have continued to dwindle. The week ending January 3 witnessed a substantial decline of $5.7 billion, plunging to a 10-month low of $634.6 billion – the fifth consecutive week of depletion. This downward trend in forex reserves, which had reached a peak of $704.9 billion in late September, underscores the challenges faced by the Indian economy in the current volatile global market scenario.
Speculation Surrounding New RBI Governor
Amidst these economic uncertainties, the recent appointment of Sanjay Malhotra as the new governor of the RBI has added an element of intrigue to the situation. With Malhotra’s first week in office passing without any public statements, market participants are eagerly awaiting his stance on crucial issues such as economic growth, inflation, and exchange rate management. The lack of clarity on the new governor’s approach has further fueled speculations and uncertainties in the financial markets, adding to the prevailing sense of unease among investors and analysts alike.
