The Indian rupee experienced significant downward pressure in early Tuesday trading, crossing the psychologically critical threshold of 25 against the UAE dirham. Opening at 91.82 against the US dollar (equivalent to 25.01907 versus the dirham), the currency showed a modest recovery of 8 paise from its record low, though concerns about its continued weakness persist.
Market analysts attribute the rupee’s persistent decline to multiple factors, including substantial equity outflows that have reached nearly $4 billion for January. This represents a 1.18% decline for the currency just last week, bringing it perilously close to the 92.00 per dollar mark for the first time in history.
The Reserve Bank of India has actively intervened to stabilize the currency, though traders report the central bank has adopted a strategy of supplying dollars at various levels rather than defending any specific exchange rate threshold. This approach has failed to halt the rupee’s slide, suggesting deeper underlying pressures beyond portfolio flows.
Additional factors contributing to the currency’s weakness include increased bullion imports and growing depreciation expectations that have amplified dollar demand. The sustained decline has created a self-reinforcing cycle where expectations of further depreciation drive additional dollar buying, putting further downward pressure on the rupee.
The breach of the 25-to-dirham threshold represents a significant psychological milestone for markets and may signal continued volatility ahead for the Indian currency amid global economic uncertainties and domestic market challenges.