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Last updated: 07 Nov, 2023  

Rupee.9.Thmb.jpg Rupee volatility

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Bikky Khosla | 07 Nov, 2023

The Indian Rupee, which was facing headwinds due to higher yields on US bonds, last week plunged to an all-time low of 83.33 against the US dollar. The RBI has been trying to prevent this volatility by releasing US dollars from its reserves, but experts rightly point out that this cannot continue beyond a point, particularly in the background of continuous decline in our forex reserves which stand at $583.5 billion during the week ended October 20.

This situation seems to be improving, however, with the currency closing stronger on Monday amid the softening of the dollar index. It is notable here that for the last few weeks Rupee’s volatility has been confined to 82.80 and 83.50 despite heightened economic uncertainties and geopolitical tensions on the global front as well massive FII funds outflow from the equity segment on the domestic front.

Experts point out that the FII outflow situation may not worsen further unless the geopolitical uncertainties in the Middle East deteriorate. Also, during the last few weeks, crude prices have retraced sharply and as per latest forex data, our reserves have increased to $586.111 billion. In the background of this, it will be interesting to see the upcoming inflation numbers which will surely be considered by the RBI in its next policy meeting.

Meanwhile, the index of eight core industries posted 8.1 percent growth in September 2023 - the lowest in four months – against a 14-month high of 12.5 percent in August. Also, recently a survey conducted by S&P Global has pointed out that India's manufacturing activity decreased to an eight-month low in October, with fall in total new orders, production, exports, buying levels and stocks of purchases. This situation needs to be taken care of.

I invite your opinions.

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