The Indian rupee’s performance in 2024 has been a topic of great interest and concern, especially as it declined for the seventh straight year. The factors contributing to this decline include external headwinds such as the U.S. election victory spurred surge in the dollar following Donald Trump’s win, and internal challenges like slowing growth and a widening trade deficit.
Despite the rupee’s relative resilience compared to its Asian peers in the first three quarters of the year, it faced significant pressure in the final quarter. The currency dropped 2.8% overall, ending the year at 85.6150 per U.S. dollar, with multiple record lows reached in the last quarter.
The Reserve Bank of India (RBI) played a crucial role in managing the currency’s volatility throughout the year. The central bank intervened regularly to support the rupee, especially during times of global uncertainty and market turbulence. However, the RBI’s efforts were tested in the last quarter as India’s growth rate slowed, the trade deficit widened, and foreign investors pulled out significant amounts from Indian equities.
Looking ahead to 2025, there are expectations of continued rupee depreciation. Traders will be monitoring potential U.S. trade tariffs that could impact emerging market currencies, as well as India’s growth trajectory and any changes in RBI’s forex strategies under the new governor.
Overall, the performance of the Indian rupee in 2024 serves as a reminder of the complex interplay of domestic and global factors that influence currency markets, and the importance of proactive central bank intervention in managing currency volatility.