Rupee decline, FII selling not due to economic fundamentals: Source

New Delhi: The recent decline in the value of rupee against the dollar, and the foreign institutional investors (FIIs) offloading their shares in the Indian markets, are not due to India’s economic fundamentals but more to do with the policies of United States President Donald Trump, a top official said.

“Depreciation is only against the dollar, if you compare our exchange rate against other currencies, the rupee is stable,” a source said, adding the stability against the other currencies indicates that the economic fundamentals are good.

The Indian rupee slipped to a record low of 86.65 against the US dollar last week. Most global currencies have weakened against the greenback due to Trump’s announcement of imposition of tariffs on major trading partners including China, Canada and Mexico.

The rupee has depreciated by over 3% since the announcement of US presidential results in November. The depreciation in the value of currency makes imports expensive.

The Trump administration on Friday announced the imposition of the first set of tariffs against Mexico, Canada and China. However, he has threatened the imposition of fresh tariffs on India on multiple occasions.

In a post-budget interview with news agency PTI, Finance Minister Nirmala Sitharaman said the depreciation in the rupee against the US dollar is a matter of concern as it makes imports costlier, but she rejected criticism that the local currency has seen all-round weakness.

“Our macroeconomic fundamentals are strong. Rupee wouldn't be stable against all the currencies if the fundamentals were weak,” Sitharaman said.

The Reserve Bank of India (RBI) is believed to have intervened in the currency markets multiple times in the recent months to prevent a sharp drop in the rupee valuation. In the case of sharp depreciation, the RBI sold dollars from the reserves to support the Indian currency.

This has negatively impacted the country’s foreign exchange (forex) reserves, which have declined by over $70 billion in the past three months. Reserves fell to $629.55 billion for the week ended January 24, 2025 from the high of $701.17 billion recorded in October 2024.

On the aggressive selling by the FIIs in the Indian stock markets, the source said it is also linked to the US president’s tariff and business policies. “A lot of FIIs are booking profits, they have made money and they will come back again,” the person, who did not wish to be named, said.