Rewind 2024: Rupee

In 2024, Indian currency Rupee fell Rs2.06 or 2.47 per cent to all-time low of 85.27/USD on Thursday (Dec 26, 2024) from 83.21 on December 31, 2023. The fourth quarter of 2024 has been challenging for RBI to support the home currency in the forex market. RBI spent $44.5 billion alone to defend rupee in October, during which rupee fell 30 paise to Rs84.06/USD.

Net FPI outflows were $10.9bn in October and $2.4 billion in November. However, FPIs turned positive during December (as of Dec 18) with net inflows of $3.6 bn.

The sluggish domestic stock market, strong demand for the Greenback from importers and surging crude oil prices were weighing on the local unit. Hawkish tone of US Fed and improving US economy would further support the US dollar. Prior to these developments, unabated FII outflows have been impacting the Indian currency.

Rupee’s real effective exchange rate (REER) climbs to 108.14 in Nov from 107.20 in October 2024, indicating the Indian unit appreciated by 0.9 per cent m-o-m in November. REER, which represents the inflation-adjusted, trade-weighted average value of a currency against its trading partners, is often used as an indicator of external competitiveness.