The Indian rupee opened at a record low of 86.6 against the US dollar on Monday (January 13).
The Indian rupee opened at a record low of 86.6 against the US dollar on Monday (January 13). It is the biggest single-day drop in nearly two years. The last time it fell this low was in February 2023. But once upon a time, though, the USD to INR exchange rate was less than 5.
After gaining independence in 1947, India adopted a fixed exchange rate system where the government managed any fluctuations in exchange rates. This helped the value of the Indian rupee stay constant. The 1970s oil crisis and wars with Pakistan and China in the later years disrupted the exchange rate, straining India’s foreign exchange reserves.
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From 1991 to 2000, India adopted a series of economic reforms and liberalisation policies that shifted the fixed exchange rate system to a more flexible one. The Asian financial crisis (1990s) and India’s efforts to modernise its economy played a key role.
In 2002, 1 USD to 1 INR stood at 47 and then weakened to Rs 75 in 2020. Following the 2008 financial crisis, the more recent COVID-19 pandemic influenced exchange rates across the world.
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For the last few months, the rupee has been hitting a fresh low against the US dollar with each passing day. The country’s currency has declined nearly 2 percent since December over concerns of India’s slowing growth and expectations that the central bank may slash rates as soon as February.
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The dollar has been witnessing a boost rallying in the lead-up to US President-elect Donald Trump’s inauguration on January 20. For India, the rupee’s depreciation highlights emerging markets’ challenges, including higher import costs and a potential rise in inflation, further complicating the economic recovery. The rupee is likely to remain volatile in the near term.
