RBI Intervenes as Rupee Hits Record Low of 85.96 Against US Dollar
India, a member of BRICS, is working towards protecting its currency, the rupee, which has greatly diminished in the foreign exchange market. After the rupee export reached an all-time low of 85.96 to one US dollar on January 1, 2025, the Reserve Bank of India (RBI) ordered state-run banks to sell off U.S. dollar reserves. This is against the backdrop of expecting the greenback to depreciate the rupee further, thus placing pressure on the inflation rate because of high import costs.
The RBI’s latest move is to stabilize the rupee by asking state-run banks to sell as many U.S. dollars as possible in the forex market. The strategy aims to prevent a further decline in the rupee’s value, which is considered unfavorable for India. The global acknowledgment of the U.S. dollar has evoked several issues, like the effects of a high dollar value on India’s import and export business.
India plans to release the dollar and allow the forex market to access liquidity because it expects the rupee to rise in value. The emergency action is not new, for India has converted to foreign exchange reserves, particularly the USD, to stem any adverse effects on the rupee. India’s Reserve Bank is closely observing the situation and continues to contribute as much as possible to address the problem of stabilizing the national currency.
The increasing strength of the U.S. dollar has pressurized the Indian rupee. Increased dollar value due to political instabilities in the US and global financial instability affects the rupee’s value against the dollar, which remains fragile. India’s central bank has voiced some fear that the phenomenon might lead to inflation, driven by increased prices of imported goods, including oil and other necessities.
Economic forecasts and currency traders suggest that India’s growing trade deficit caused by the declining rupee can result in inflation, directly impacting the quality of life and the country’s predictable economic model. The measures adopted by the RBI are appropriate to avoid the impact of these global exchange rate fluctuations on the Indian economy.
Recent actions of the Indian authorities’ Forex market intervention have raised debates over the effectiveness of having a stable rupee in the long run. Although the RBI has been able to avoid a steeper drop and has managed to retain the supremacy of the US dollar, it has also challenged India and other BRICS nations. The outlook continues to be worrisome because India has to manage both inflation and currency stability in the face of challenges from external pressures.
