The indian rupee has again fallen sharply, hitting record lows against the US dollar, alarming both investors and economists. Market experts point to three major reasons for this continued weakness:
1. Uncertainty in India-US Trade Deal
The ongoing negotiations and lack of clarity surrounding the India-US trade agreement have created uncertainty in the market. Investors are hesitant to commit funds amid fears of potential trade restrictions or unfavorable terms, putting pressure on the rupee.
2. Foreign Portfolio Investor (FPI) Outflows
Another significant factor is the continued outflow of foreign funds from indian markets. When FPIs withdraw their investments from stocks and bonds, it increases demand for foreign currency, leading to a weaker rupee.
3. Weak Investor Sentiment
The combination of trade uncertainties and capital outflows has dented investor confidence, reducing demand for the rupee in global markets. This has further contributed to its slide to record lows.
Economists suggest that to stabilize the rupee, india needs to boost foreign investment, improve trade clarity, and maintain strong macroeconomic fundamentals. Meanwhile, businesses and importers are advised to hedge currency risk to mitigate potential losses.
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