The Indian rupee depreciated over 11% last year against the US dollar, its poorest performance since 2013 and the worst among Asian currencies. The rupee closed the year at 82.61 to the US dollar, down from 74.29 at end of 2021 as the latter headed for its biggest yearly gain since 2015 propelled by the US Federal Reserve's aggressive monetary policy.

The performance, however, was better than some other global currencies like the British pound and Turkish lira.

According to the Reserve Bank of India’s Financial Stability Report, since mid-October, the rupee recovered from the bouts of volatility experienced in the earlier part of the year and has been trading close to its long term trend, a news agency reported.

The outbreak of the Russia-Ukraine war in February induced the volatility in the currency market last year as it disrupted global supply chains, fuelling inflation as well as inflationary expectations across the world.

High global crude oil prices too weighed on the rupee. Due to aggressive rate hike by central banks globally, foreign investors pulled out a net Rs1.22 lakh crore from the Indian equity markets and over Rs17,000 crore from the debt markets last year.

Imported inflation turned a key challenge for Indian policymakers as a strong dollar weighed on India's trade.

though the Indian rupee crossed 83 to a greenback last year, there is hope in the New Year, with indications that the US Federal Reserve will further reduce the intensity of rate hikes in 2023.

Global investors too have not lost confidence in Indian markets, and foreign institutional investors’ inflows have started improving.

In addition, declining global energy prices, strong fundamentals of the Indian economy and inflation coming back to the Reserve Bank's comfort level will help the rupee regain some strength against the US dollar, the agency report added.