10% decline in rupee against dollar in Samvat 2078 on various headwinds

AHMEDABAD: The movement of the rupee between October 2011 and March 2022 was bi-directional but on average it depreciated on the back of factors including specific Fed measures, global disruptions such as the Russia-Ukraine war. In Vikram Samvat 2078, the rupee fell by 10 percent against the dollar. Last year, the rupee touched an all-time low of 83.29 which last stood at 82.68.

Last year, the rupee traded with a marginal rise from mid-October to mid-November. In subsequent months, the rupee hit a low of 76.92 on March 7, 2022 due to selling by foreign investors, strengthening of the dollar, rise in crude oil prices and rising geopolitical tensions.

In the subsequent period, the rupee recovered some of its losses with the drop in crude oil prices and stood at Rs 75.81 on March 31, 2022. According to the Reserve Bank of India's Monetary Policy Report, the second wave of the pandemic saw significant volatility. However, it softened slightly in the second half of March 2022.

Between April and September in FY23, it traded lower against the dollar. RBI's intervention curbed volatility and ensured smooth movement of the rupee. Active in the foreign exchange market (spot and forward), the RBI said, "Our aim is to curb excessive volatility in the foreign exchange market, which is not working at any particular level."

The RBI on July 6 announced a series of measures to increase capital inflows and ensure overall economic and financial stability. The dollar gained 16.1 per cent against a basket of major currencies in FY23 (till September 27), however, the rupee depreciated by 6.8 per cent against the dollar, showing better performance compared to developed and emerging economies.

The relative outperformance of the Indian currency was due to strong economic fundamentals etc. Inflation in India is below the weighted average of key trading partners. RBI has said these things in the monetary policy report of September 2022.

India's foreign exchange reserves of $528.36 billion (as of 14 October 2022) remain strong despite the decline in investment, which buffers against external shocks. The rupee continued to weaken in October and crossed 82 as foreign portfolio investors withdrew.