Rupee hits record low after biggest single-day fall since Feb 2023

The Indian rupee (INR) plunged more than any other emerging market currency to hit an all-time low of 85.81 against the U.S. dollar on Friday, marking its steepest fall since February 2023.

The fall of the Indian currency comes amid strong U.S. dollar demand in the non-deliverable forwards (NDF) market.

As the rupee hits another record low against the greenback, India’s import bill is expected to increase by about $15 billion due to INR depreciation impact, according to Global Trade Research Initiative (GTRI).

This depreciation of the Indian rupee will negatively impact gold imports, especially as gold prices have surged by 27% from $2,066.26 per ounce in December 2023 to $2,617.11 per ounce in December 2024, says Ajay Srivastava, founder of Global Trade Research Initiative (GTRI).

India's oil imports, mostly priced in U.S. dollar, could have been significantly costlier due to the rupee's depreciation, says Srivastava. However, the impact has been mitigated by a 5% drop in Brent crude prices, from $77.6 per barrel in December 2023 to $73.7 per barrel in December 2024, he adds.

The most significant effect of the rupee’s depreciation will be on India’s $100 billion worth of industrial goods imports from China, Srivastava says. “Since both the INR and the Yuan have weakened against the US dollar, the dual depreciation amplifies the cost of these imports, further straining trade balances,” he explains.

Compared to December last year, the Indian Rupee (INR) has depreciated by 2.34% against the US dollar, moving from ₹83.25 to ₹85.20, while the Chinese Yuan has weakened by 0.06%, shifting from ¥7.25 to ¥7.30.

Of late, routine intervention by the Reserve Bank of India (RBI) limited the rupee’s losses. Commenting on the issue, stock market veteran Sandip Sabharwal in a post on X said, “A clear change in strategy is visible as soon as the new RBI Governor has taken over. INR is being allowed to move more freely which is important. Das wasted nearly $45 billion in just 2-3 months protecting the INR at a time when the USD was in a tearaway rally against all major currencies You cannot protect a Tsunami by building a wall.” Sabharwal says proper value of the rupee not only boosts exports but also protects domestic industry from cheap imports without imposing unnecessary import duties.