Muscat: The Indian Rupee experienced a significant decline on Friday, reaching a level of Rs 84.09 per US dollar.
On Sunday, exchange houses in Oman were offering a rate of Rs 218.20 per Omani Rial, marking an all-time low.
In an interview with the Times of Oman, R. Madhusoodanan, a distinguished financial expert based in Muscat, attributed the substantial depreciation of the Indian Rupee against the US dollar to several factors. These include the substantial withdrawal of funds from the stock markets by foreign institutional investors, a notable increase in crude oil prices, and prevailing tensions in the Middle East regions.
Additionally, Madhusoodanan highlighted that the rupee has been on a defensive stance due to India's diminishing Balance of Payments (BOP) surplus and an escalation in the merchandise trade deficit. He further noted that the reduction in basic customs duties on gold, silver, platinum, and mobile accessories in the recent Union Budget has adversely affected the trade deficit.
It is acknowledged that currencies across emerging markets have weakened over the year, with the Japanese Yen experiencing a significant decline in value against the US dollar. However, Madhusoodanan pointed out that the Indian Rupee has maintained a range-bound level of 83-84 during the year, attributed to the Reserve Bank of India's (RBI) interventions aimed at stabilizing the currency. The RBI's forex reserve has reached a record high of $700 billion, positioning India among the four nations with the largest forex reserves.
Looking ahead, there is a concern that the rupee may face further pressure. With its strong forex position, the RBI may intervene to minimize currency volatility, albeit with a marginal decline. Factors such as the potential reduction in interest rates by the US Federal Reserve in November, uncertainty regarding crude oil prices, fluctuations in the dollar index, fears of a recession in the United States, a shift from equity investments to gold, and other market dynamics are expected to influence the movement of the rupee against the US dollar.
