Data | Why is the Indian rupee weakening
Indian rupee’s exchange rate slid past the 76-per-U.S.-dollar-mark on December 16 as trade gap widened and foreign investors pulled out funds from equities
On December 16, the Indian rupee’s exchange rate slid past the 76-per-U.S.-dollar-mark for the first time since June 2020 and stood at 76.25. It had fallen beyond 76 in March 2020 when COVID-19 cases surged and economies came to a grinding halt. However, this time its fall was driven by widening trade deficit and foreign investors pulling out funds from equities. India’s trade gap widened to a record high of $22.9 billion on account of rise in imports. Foreign portfolio investments (FPI) also plunged for the third consecutive month, thus weakening the rupee further. But the rupee’s fall is modest when compared to the currencies of other emerging economies.
Tumbling down The chart shows the rupee’s U.S. dollar exchange rate between January 2010 and December 2021. The rupee breached the 76-to-a-dollar mark on December 16, an 18-month low. It had first slipped past the 76-mark in March 2020 on account of global restrictions imposed to stop the COVID-19 spread and heightened demand for the safe haven greenback.
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