The Finance Ministry informed the Rajya Sabha that the Indian rupee depreciated over 1% in January, while the foreign exchange reserves with the RBI dipped by over $70 billion in the October-December period of 2024. Despite closing slightly higher against the US dollar, the rupee ended the day at 87.07 per US dollar after hitting an all-time low of 87.28 during trading.
The Finance Minister, Nirmala Sitharaman, stated that the value of the rupee is market-determined and influenced by various factors such as the movement of the dollar index, capital flows, interest rates, crude prices, and the current account deficit. Data accompanying her written reply revealed that the rupee depreciated to 86.53 on January 28, down over 1% from 85.61 on December 31. She also noted that since the beginning of the last quarter of 2024, the rupee, along with other Asian currencies, depreciated against the dollar due to uncertainties surrounding the US elections.
In another written reply, Minister of State in the Finance Ministry, Pankaj Chaudhary, highlighted that the RBI monitors key global developments that may impact the dollar-rupee exchange rate. Factors such as monetary policy actions of major central banks, economic data releases, OPEC+ meeting decisions, and geopolitical events are all taken into consideration. The RBI intervenes in the foreign exchange market only to curb undue volatility in the rupee. Chaudhary disclosed that the forex exchange reserves with the RBI decreased from $705.78 billion at the end of September 2024 to $635.7 billion at the end of December 2024, primarily due to the sale of foreign exchange and revaluation losses of assets.
Overall, the Indian rupee’s depreciation in January and the decrease in foreign exchange reserves reflect the impact of both local and global factors on the currency’s value and the RBI’s efforts to maintain stability in the foreign exchange market.
