In relation to the US dollar, the Indian rupee plunges to a record low; what caused the decline?

Currency dealers report that on Friday, March 22, in offshore trading, the Indian rupee fell sharply vs. the US dollar due to increased demand for dollars from corporations as the fiscal year came to an end.

The rupee fell 27 pesos from Friday’s spot market close to a low of 83.70 per Dollar at 3:30 pm IST. The rupee’s decline, which began at 83.28 per dollar and ended at 83.15 at the closing on Thursday, is indicative of the pressure on the currency market.

The following week’s trading schedule is shortened since onshore FX markets are closed on Monday in observance of Holi and on Friday in observance of Good Friday.

In spite of its recent interventions in the dollar/rupee market to avert a severe fall in the Indian currency, the Reserve Bank of India’s (RBI) activities seemed muted and fell short of traders’ expectations for vigorous dollar sales.

Stop-loss triggers were triggered as a result of the increase in dollar purchases and the decrease in offshore trading volume, which made the rupee’s value relative to the US dollar worse.

The decline in the value of the rupee is said to have been influenced by the Chinese yuan’s weakness in offshore trading, according to traders.

Furthermore, traders were able to profit from a strong decline in the rupee relative to the onshore spot rate in offshore markets, which put further pressure on the Indian rupee, according to an unnamed currency dealer from a well-known private bank.

With the rupee’s decline to 83.50 against the dollar, it has somewhat recovered from its previous lows.

Some traders speculate that the central bank may have stepped in to stop the rupee from depreciating any more by engaging in dollar-selling operations in offshore trading at the 83.70 level.

Anticipating Tuesday’s trade, the Indian rupee is expected to begin higher than 83.50 against the US dollar and move between 83.10 and 83.80, indicating further volatility in the market.

The path of the rupee in the next few days might be greatly influenced by RBI actions, thus, currency specialists suggest keeping an eye on global events, especially moves in the US dollar and other key currencies.

Investors remain cautious in the face of volatile exchange rates and shifting local and global economic circumstances, as the financial year-end dynamics drive up demand for dollars and impact sentiment in the currency market.

In order to assess the Rupee’s stability and possible effects on wider economic indicators, market players will be carefully monitoring any changes in offshore and onshore trade as well as central bank activities throughout the week.