Rupee tumbles 3 per cent in 2024; turbulence to ebb in slow motion in next year

The Indian rupee tumbled 3 per cent in 2024 as concerns over slower economic growth and the green buck's global strength weighed, but it was among the least volatile currencies in the world and the headwinds may be less intense in the coming year.

The rupee settled at new lows as the year closed as the dollar's resurgence weighed on emerging-market currencies.

The action-packed 2024 continued to impact the rupee's exchange rate against major currencies throughout, with a series of geopolitical events ranging from the Russia-Ukraine war and crisis in the Middle East to trade disruptions in the Red Sea and elections across several major economies.

Global factors, including measures taken by major central banks, have hit not only the rupee-dollar dynamics but also disrupted the exchange rates of currencies across all emerging economies.

In fact, the rupee's fall with respect to the dollar has been less than its depreciation in terms of other currencies. And it has ended up with gains compared to the euro and the Japanese yen.

Reserve Bank of India's (RBI) ex-governor Shaktikanta Das also said in the central bank's December bi-monthly monetary policy that the Indian rupee has remained less volatile compared to its peers in emerging markets.

Yet, the RBI has been more active in its efforts towards stabilising the rupee-dollar rate, thanks to increased demand for the greenback due to India's dependence on oil imports and the widening trade deficit.

"RBI was also seen intervening actively in NDF (non-deliverable forward) markets to prevent sharp depreciation of the rupee," said Naveen Mathur, Director - Commodities & Currencies, Anand Rathi Shares and Stock Brokers.

This was evident in foreign exchange reserves, which declined from the record high of USD 704.89 billion in late September to USD to USD 644.39 billion as of December 20, 2024, the lowest level in nearly six months.

Foreign currency assets also include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

India's external challenges intensified as China's GDP growth slowed to 4.8 per cent, reducing demand for Indian exports. Besides, supply chain disruptions due to tensions in the Middle East and an escalated crisis in the Red Sea hit the trade balance of several countries, including India.

(Except for the headline, this story has not been edited by Editorji News Desk and is published from a syndicated feed.)