The Indian rupee has fallen to an all-time low, trading at 84.85 per U.S. dollar. This sharp drop follows the appointment of Sanjay Malhotra as the new Governor of the Reserve Bank of India (RBI). Market expectations of a more accommodative monetary policy under Malhotra have spurred selling pressure on the rupee.
Why is the rupee falling?
Malhotra’s appointment has fueled speculation that the RBI might lower interest rates to support the slowing economy. Lower interest rates often make a currency less attractive to investors, leading to increased selling.
Adding to the pressure, India is grappling with rising inflation and sluggish economic growth, further weighing on the rupee’s value.
What it means for India
The weakening rupee has significant implications:
- Higher import costs: A weaker currency makes imports, like crude oil, more expensive, potentially worsening inflation.
- Economic uncertainty: Investors are closely watching how the new RBI leadership manages this volatility.
What’s next?
The RBI is expected to step in to stabilize the rupee, but much will depend on how Malhotra balances rate cuts with the need to curb inflation. For now, markets remain cautious, and all eyes are on the central bank’s next moves.
India’s currency struggles underscore the delicate balance central banks face between fostering growth and maintaining currency stability.