The Indian rupee concluded at a fresh nadir of 83.38 against the US dollar, propelled by heightened demand from oil companies and strategic interventions by the Reserve Bank of India (RBI).

Closing at 83.38 against the US dollar, the Indian rupee experienced a marginal descent from the preceding close of 83.34. This downturn was attributed to an escalated demand for dollars from oil companies, further compounded by the RBI’s tactical interventions to forestall a more pronounced decline.

Influential Factors Impacting Rupee’s Performance:

1. Surge in Dollar Demand from Oil Companies: The pivotal factor influencing the rupee’s downturn was the intensified demand for dollars from oil companies. This surge, coupled with calculated RBI interventions, played a pivotal role in shaping the day’s foreign exchange market dynamics.

2. Active RBI Involvement: The RBI proactively engaged in stabilizing the rupee, averting a more substantial depreciation. Despite these endeavors, the currency concluded at an unprecedented low, underscoring the challenges faced by the central bank in managing the forex market.

Regional Currency Trends:*

1. Erosion of Asian Currencies: Extending beyond the Indian rupee, a multitude of Asian currencies witnessed depreciation. Notable decliners encompassed the South Korean won, Taiwanese dollar, and Thai baht, indicative of broader economic challenges in the region.

*2. Performance Within a Limited Range: Throughout the week, the Indian rupee demonstrated a performance confined between 83.22 and 83.38. Factors such as importers engaging in purchases, RBI selling dollars, and the impact of initial public offerings (IPOs) failed to substantially alter this trajectory.

Rupee’s Annual Performance:

1. Tenacity Amid Global Adversities: In 2023, the Indian rupee displayed tenacity, depreciating by a mere 0.8% despite a demanding global economic landscape. In contrast, the rupee experienced a significant depreciation of over 10% in 2022, influenced by the European war and global central bank interest rate hikes.*

2. Proactive Central Bank Measures and Augmented Foreign Reserves: The RBI’s vigorous participation in the foreign exchange market to mitigate volatility underscored the significance of India’s foreign exchange reserves. With a robust reserve corpus of $596 billion, covering 10 months of imports, and an augmentation of $34 billion in 2023, India manifestly showcased its dedication to upholding stability in the forex market.
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Inquiries Pertaining to Examinations

Q1: Why did the Indian rupee conclude at a new low of 83.38 against the US dollar

A1: The rupee’s descent was influenced by heightened dollar demand from oil companies and strategic interventions by the Reserve Bank of India (RBI) to avert a steeper fall.

Q2: What factors contributed to the depreciation of most Asian currencies, including the South Korean won and Taiwanese dollar?

A2: Beyond the rupee’s decline, the broader trend of depreciating Asian currencies was shaped by regional economic challenges and a intricate global economic landscape.

Q3: How did the Indian rupee fare in 2023 compared to the preceding year, and what were the key factors influencing its resilience?

A3: Despite a challenging global milieu, the Indian rupee exhibited resilience in 2023, depreciating only by 0.8% compared to the over 10% depreciation in 2022. Factors contributing to this resilience included proactive interventions by the RBI and India’s substantial foreign exchange reserves.