Indian rupee hits new all-time low of 95.85 per dollar
What's the story
The Indian rupee has hit a new all-time low, falling to 95.85 against the US dollar on Thursday. The decline is largely due to high oil prices and continuous foreign portfolio outflows. The situation has put pressure on India's current and capital accounts, making the currency particularly vulnerable due to its heavy reliance on oil imports.
Currency fluctuations
Rupee hits record lows for 3 consecutive days
The rupee has been on a downward trend, falling 1.4% this week alone. It hit record lows in every trading session from Tuesday to Thursday. India imports around 90% of its oil and nearly half of its gas needs, making the currency especially vulnerable among emerging markets.
Intervention strategies
RBI intervenes in forex market to stabilize rupee
In a bid to stabilize the rupee, India's central bank has sold down foreign exchange reserves. On Thursday, dollar sales from state-run banks—likely on behalf of the Reserve Bank of India (RBI)—helped cushion the fall of the currency. Despite these efforts, economists and traders expect continued weakness in the rupee due to a third consecutive year of balance of payments deficit.
Economic forecast
Current account deficit likely to exceed 2% of GDP
Analysts at BofA Global Research have predicted that India's current account deficit is likely to exceed 2% of GDP. This is the level the RBI has historically considered sustainable for India in the long run. Prime Minister Narendra Modi recently urged citizens to take measures to help conserve foreign exchange reserves, while the federal government has raised tariffs on gold and silver imports to curb domestic demand.