Rupee Depreciates 3 Per Cent In 2024, Manages To Remain Less Volatile Than Its Counterparts

Due to several geopolitical conflicts such as the Russia-Ukraine war, the crisis in the Middle East, trade disruptions in the Red Sea, and elections across global economies, the rupee suffered in 2024

Global factors such as the measures taken by major central banks impacted the rupee-dollar dynamics, and also disturbed the exchange rates of currencies across emerging economies.

Source : ABPLIVE AI

The Indian rupee took a major beating in 2024 as concerns regarding weak economic growth and the global strength of the American dollar weighed on the currency. The domestic unit tanked 3 per cent in the year, however, it managed to remain among the least volatile currencies in the world.

Going ahead, experts said that headwinds are expected to be less intense in 2025. With a series of geopolitical conflicts such as the Russia-Ukraine war, the crisis in the Middle East, trade disruptions in the Red Sea, and elections across global economies, the currency suffered in 2024, reported PTI.

Global factors such as the measures taken by major central banks impacted the rupee-dollar dynamics, and also disturbed the exchange rates of currencies across emerging economies. In comparison to the euro and the Japanese yen, the rupee ended up with gains, the report said.

Notably, the Reserve Bank of India (RBI)’s former governor, Shaktikanta Das, earlier said that the domestic currency remained less volatile than its peers in the emerging markets. 

Naveen Mathur, Director - Commodities & Currencies, Anand Rathi Shares and Stock Brokers noted, “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.”

Anuj Choudhary, Research Analyst, Mirae Asset Sharekhan, noted that the American dollar outperformed the market and gained 6.9 per cent in the year. The expert attributed this growth to the improvement in the US economy, geopolitical concerns, and weakness in Europe.

Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities, said that the rupee suffered major weakness in the latter half of 2024, specifically between October and December, weighed down by major outflows from Foreign Institutional Investors (FIIs). During this period, FII outflows touched Rs 1.70 lakh crore nearly and this impacted the performance of the domestic currency.

Further, the domestic economy faced major challenges from the global scenario as China’s GDP growth slowed down to 4.8 per cent, resulting in a fall in demand for Indian exports. Additionally, tensions in the Middle East and crisis in the Red Sea led to an escalation in supply chain disruptions and affected the trade balance of multiple countries including India.