Topic 5: RUPEE: FADING AWAY

In December 2024, the Indian rupee (INR) saw fluctuations against the U.S. dollar (USD), driven by a range of economic and geopolitical factors. The exchange rate started the month at ₹85.12 per USD on December 2, showing some initial stability. By December 20, it slightly adjusted to ₹85.04, and by December 24, the rupee depreciated further to ₹85.16. By the end of the month, on December 31, the INR stood at ₹85.60 per USD, reflecting a 0.15% increase from the prior day and a 2.92% decline from the previous year, when the exchange rate was ₹83.17. A key factor influencing the rupee was the U.S. Federal Reserve’s 25 basis point rate cut in mid-December. While a weaker dollar typically benefits emerging market currencies, uncertainty surrounding future rate cuts led to mixed investor sentiments. Domestic factors, such as inflation rates and trade balances, also played a role in shaping investor confidence in the rupee. Expectations of tighter monetary policies from the Reserve Bank of India (RBI) due to rising inflation added pressure. Additionally, fluctuating foreign institutional investor (FII) inflows and outflows affected the rupee’s movement. Overall, the rupee experienced moderate depreciation, closing at ₹85.60 per USD by December’s end.



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