In September, the Indian rupee faced a renewed challenge as it depreciated past the 83.3 per USD mark, reaching a new record low. This decline was driven by several factors, including a strong DXY (U.S. Dollar Index) and mounting pressure from high import prices, signaling a potential increase in capital outflows from India.
The selling pressure on India’s domestic currency had been building since the beginning of July. This period coincided with significant oil imports, which aligned with a global surge in energy prices, resulting in a greater volume of rupees being exchanged for oil and gas imports.
Additionally, the hawkish stance of the Reserve Bank of India (RBI) had an impact on the secondary market, affecting G-Sec prices and rupee-denominated debt assets. This, in turn, intensified foreign selling from India, offsetting the currency’s support from higher interest rates.
Market observers remained vigilant for signs of forex intervention by the RBI, as the central bank sought to curb further depreciation of the rupee. Such measures had been consistent since the third quarter of 2022, as authorities aimed to stabilize the currency amidst challenging economic dynamics.
The situation reflects the complex interplay of domestic and global factors influencing the Indian rupee’s value and the RBI’s efforts to manage currency stability in the face of ongoing pressures.