All Eyes on the Indian Rupee After it Falls 105 Paise on Wednesday

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All Eyes on the Indian Rupee After it Falls 105 Paise on Wednesday
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- The Indian rupee had its sharpest fall in 20 months as it dropped 105 paise on Wednesday against the US dollar. The rupee ended Wednesday at Rs 74.47 to one US dollar at the interbank currency exchange, its lowest level since November 13, 2020, and the sharpest fall since August 5, 2019.

The rupee has fallen mainly due to the resurgence of the COVID-19 pandemic that has disrupted what was an already fragile economic recovery. Complete or partial lockdowns in Maharashtra, India’s richest state, and several other states haven’t helped either.

A second reason for the drop is RBI’s decision to keep interest rates unchanged and to ensure ample liquidity in the system. Experts say that the forex market didn’t expect such a dovish stance from the central bank. The rising second wave of the COVID-19 virus will impact demand and hurt the rupee.

Further, three states: Maharashtra, Orissa, and Andhra Pradesh have said that they are running out of vaccines and oxygen.

From the looks of it, it is likely that the rupee will continue to trade at these levels for the short-to-medium term at least. Bloomberg data says that the rupee is now Asia’s worst performer for April.

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