Rupee at record low! Reasons, outlook, RBI measures and how it impacts investors—All you need to know

In a first, the Indian rupee hit the psychological mark of Rs 80 per dollar in the early trade on Tuesday. The fall was led by domestic and global factors concerning the Indian currency. As per Zee Business report, the rupee has fallen by 2.72% in the last one month, while the Indian currency got weaker by 7.4% in the past one year, recorded as on early trade on Tuesday. 

According to analysts, aggressive rate hike by US Federal Reserve, though controlled but unabated selling by Foreign Institutional Investors (FIIs), falling Indian forex reserves and record inflation in the US were among the top factors contributing to the downslide.

Rupee depreciation to continue 

Experts are of the view that the rupee can slid further from the current levels.  

"The rupee has finally breached the Rs 80-mark, a key psychological level. The rupee is expected to further slide due to the current severe rate hike by the US Fed, relentless selling by foreign investors, and the rising demand for the USD due to its safe haven status," said Punit Patni, Equity Research Analyst, Swastika Investmart Ltd.  

The expert, however, was optimistic that the Reserve Bank of India's (RBI) would curb the fall in the currency soon.  

"The RBI is aware of the falling rupee quagmire and could take actions to curb the further depreciation. Thus, we expect further downside to 81 to 81.5 levels," the expert said.  

Earlier, speaking on the weakness of the rupee, Santosh Meena, Head of Research, Swastika Investmart Ltd, had also listed similar reasons.  

He had said the rupee has been under pressure and trading at its all-time low as the higher-than-expected June US Inflation data has increased the probability of a 100 bps rate hike by the Fed. Further, the relentless FIIs selling has exacerbated the issue, Meena had said.  

"Another point to note is that the Indian forex reserves fell to the lowest level in over 14 months, making it an impediment for the RBI to control the further downside on the rupee. Recently, RBI allowed banks and traders to invoice and settle global transactions in rupees. This is a longer-term step to make the rupee more international. Nvertheless, we don’t expect any short-term respite due to this move," Meena had said. 

Earlier, the Foreign Institutional Investors had offloaded equities worth Rs 2.3 lakh crore in the Indian market in the past one year as on July 19, Zee Business data revealed.  

How it impacts investors?  

Speaking of how it affects investors looking at it from a global investments point of view, Asheesh Chanda, Founder & CEO, Kristal.AI, a global wealth advisory platform, says the it is clear that global investors are choosing the safety of US markets over the recession risks of the EU.  

The impending threat of Russia cutting off gas supplies in winter coupled with the slow intervention by the ECB to control inflation, means that the recession in the EU looks imminent, he pointed out.  

"Hence, investors are selling Euros and buying dollars. It also reinforces the importance of USD as the safest currency during times of uncertainty. As an Indian investor, one would be well advised to dollarize their investments as even rupee is expected to decline further this year,” the expert advised.