The Indian rupee has remained virtually stable against the US dollar in the current calendar year (CY 2024), depreciating just 0.59 per cent so far. However, it has weakened considerably against the euro and the pound. The local currency has depreciated 1.6 percent against the euro and 5.6 percent against the pound, as both currencies strengthened against the dollar during this period.
The euro appreciated 1 percent, while the pound strengthened 5 percent against the dollar in fiscal 2024.
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“The underlying factor is that both currencies – the euro and the pound – have appreciated against the dollar because the US Federal Reserve (Fed) is cutting rates and easing monetary policy faster than other central banks,” VRC said. Reddy, head of the Karur treasury. Vysia Bank.
“This is the reason behind the depreciation of the dollar. What we are seeing is that the dollar index is almost close to 100, down from the previous levels of almost 105,” Reddy added.
The dollar index, which measures the strength of the US dollar against a basket of currencies, fell 0.94 percent in fiscal 2024. It closed at 100.38 on Friday.
The dollar weakened after the Federal Reserve implemented its first interest rate cut since the start of the pandemic, reducing them by 50 basis points.
“The timely intervention of the Reserve Bank of India (RBI) has kept the rupee stable against the dollar by containing the volatility of that exchange rate. However, the central bank never intervenes against the euro and pound, which is reflected here too,” said Amit Pabari, managing director of CR Forex.
The local currency hit a record low of Rs 83.99 against the dollar on September 5; However, the RBI’s intervention in the foreign exchange market through dollar sales prevented the rupee from crossing the psychologically crucial mark of 84 per dollar.
The rupee was the third most stable Asian currency against the dollar in 2023-2024, after the Hong Kong dollar and the Singapore dollar, mainly due to the timely intervention of the RBI. The rupee depreciated 1.5 per cent during the year, compared to a fall of 7.8 per cent in the previous financial year (2022-23).
Furthermore, in fiscal 2023, the local currency demonstrated notable stability against the dollar and experienced the lowest volatility it had seen in nearly three decades. The Indian unit saw a marginal depreciation of 0.5 percent against the dollar. The last time the Indian unit showed such stability was in 1994, when it appreciated 0.4 percent.
First published: September 29, 2024 | 19:25 IS
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