Interest, Inflation and Interventions weakened Indian rupee in 2020

By Rohit Vaid Mumbai, Dec 31 : India’s interest rates, high inflation and Reserve Bank’s market interventions weakened the rupee despite a massive inflow of direct and market-linked foreign investments during the pandemic-impacted year.
While major Asian currencies have appreciated against the US dollar such as Chinese yuan by 6.10 per cent, Korean won by 5.50 per cent and Malaysian ringgit by 1 per cent, the Indian rupee depreciated by 3.10 per cent.
It closed 2020 at 73.07 to a greenback.
“In the first half of 2020, there was a massive sell-off in the market due to the lockdown. Later, investors realised that lower crude oil prices and reduced imports was a positive for India,” said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.
“However, that realisation and the investments that followed into the Indian market was too late as the rupee was not able to fully pare its initial losses. Additionally, RBI intervention also played a role in keeping the rupee subdued.” Lately, FIIs inflows have powered a rally in equities and gave an appreciation push to the rupee.