The policy shifts by the RBI in managing the Indian currency against the US Dollar have significantly impacted the Rupee against the dollar, says a report by Union Bank of India.
In the first two months of 2025, the Indian rupee has already depreciated more than half the depreciation happened in all of 2024. By February 28 the Rupee has depreciated by 1.8 per cent against USD, this decline is already more than the 1.5 per cent depreciation seen in 2023 and nearly half of the 3 per cent depreciation recorded in 2024.
The report said "change in stance of RBI governor Sanjay Malhotra who stated that the central bank is open to more flexible rupee and will allow it to move freely in tandem with its local peers as against former RBI governor Das who favoured a very stable rupee against the US dollar is also putting pressure on rupee".
The intensification of trade war risks and uncertainty surrounding US trade policies have led to market concerns. The rupee, along with other Asian currencies, has come under pressure as investors worry about global trade disruptions.
Adding to this, the report also added that a policy shift by the Reserve Bank of India (RBI) has also impacted the rupee.
The new RBI Governor Sanjay Malhotra has adopted a more flexible approach, stating that the central bank will allow the rupee to move freely along with other emerging market currencies. This is a departure from the stance of former RBI Governor Shaktikanta Das, who preferred a stable rupee against the US dollar.
Since taking office, US President Donald Trump has made several trade tariff announcements. His first move was a 25 per cent tariff on goods from Canada and Mexico, which was delayed by 30 days but still led the rupee to cross the 87.00 mark on February 3.
Looking ahead, the market is closely watching the possible implementation of reciprocal tariffs by the Trump administration after April 1. These measures could impact India, as the US runs a trade deficit with the country.
As of FY 2023-24, the United States is India's largest export destination, with Indian exports to the US totalling USD 88.02 billion, making up 17.73 per cent of India's total exports. Any restrictions or new tariffs could impact Indian trade and further pressure the ru ..
Source Name : Economic Times