The USD/INR exchange rate rebounded on Tuesday as foreign fund outflows placed additional strain on the Indian Rupee (INR). Investors withdrawing from Indian stocks and bonds have contributed to the rupee’s recent depreciation, with global risk sentiment leaning towards safer assets amid persistent economic concerns.
Analysts point out that steady foreign outflows are leaving the rupee exposed, especially against the U.S. dollar (USD), which has benefited from rising Treasury yields and robust U.S. economic data. As higher U.S. interest rates attract international capital, emerging markets like India are facing added pressure from a stronger dollar, which is weighing on the rupee.
India’s central bank is closely observing the situation, with some market speculation about possible intervention if the rupee’s decline continues. While officials have yet to indicate immediate intervention, they emphasize that the currency largely reflects market conditions. However, ongoing foreign outflows could prompt action if the rupee’s slide becomes more pronounced. Currently, USD/INR remains at elevated levels as investors evaluate the effects of foreign withdrawals on the Indian economy. Analysts expect further rupee volatility as foreign investment patterns adjust, likely keeping the Indian currency under pressure in the near term.
