The Rupee’s Decline: Factors Behind the All-Time Low

On Wednesday, September 6, the Indian Rupee hit an all-time low of 83.14 against the US Dollar. This significant drop has raised concerns among economists and investors. In this article, we will explore the key factors that have led to this sharp decline in the value of the Rupee.

1. Strong US Dollar

The first and foremost reason behind the Rupee’s decline is the strengthening of the US Dollar. The US Dollar index has surged to 104.78, marking its highest level in six months. This rise in the Dollar’s value can be attributed to market speculation regarding US Federal Reserve interest rate hikes and an increase in US 10-year yields to 7.26 percent.

2. Soaring Crude Oil Prices

Another significant factor affecting the Rupee is the surge in crude oil prices. Crude oil has reached a price of $90 per barrel, and this spike is contributing to India’s trade deficit and current account deficit (CAD). Oil companies continuously buying dollars to meet their requirements are further boosting the demand for the US Dollar.

3. Foreign Portfolio Investment (FPI) Outflows

The Indian equity market has witnessed substantial FPI outflows in recent days. Foreign Portfolio Investors (FPIs) are cashing in on the high market valuations of equities, leading to nearly Rs 5,000 crore of outflows from equities. This exodus of foreign funds is adding pressure on the Rupee’s value.

4. Decline in Other Asian Currencies

The Rupee is not the only Asian currency facing a downturn. The Chinese Yuan, for instance, touched 7.32 against the US Dollar. This depreciation is partly due to the increasing interest rate differential between the US and China and concerns about an economic slowdown in China.

“To remain competitive, the Indian currency needs to depreciate to some extent,” says Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP.

5. Panicky Importers

Panicky importers are also contributing to the Rupee’s fall. With reduced inflows, importers are rushing to buy dollars, further exacerbating the situation. The uncertainty in global markets is causing importers to seek refuge in the US Dollar.

Anuj Choudhary, a research analyst at Sharekhan by BNP Paribas, noted, “Brent crude breached the $90/barrel mark. US dollar gained on safe-haven demand amid concerns over global economic slowdown after China’s Caixin Services PMI fell to an 8-month low at 51.8 in August vs forecast of 53.6.” He also expects the Rupee to trade with a negative bias due to risk aversion in global markets and a strong US Dollar.


The Indian Rupee’s recent plunge to an all-time low against the US Dollar is a cause for concern. Several factors, including the strengthening US Dollar, rising crude oil prices, FPI outflows, and the decline of other Asian currencies, have contributed to this situation. It remains to be seen how India’s policymakers and financial institutions respond to stabilize the Rupee’s value in the coming months.

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