Skip to main content

Why Indian rupee is falling against US dollar?-My view



The Indian currency is likely to depreciate further and the exchange rate to fall below 80 per US dollar, forecast analysts and economists. A day later, the US is nervous that the USD/INR pair will soon hit the 80 mark Analysts predict that the exchange rate for the Indian currency could fluctuate between 80 and 81 per US dollar. So far in 2022, the Indian rupee has depreciated more than 7 percent against the US dollar.


1.Stability of Rupee: Despite facing several blows in the last few weeks, rupee has been one of the best performing currencies and also the stable one in Asia. “Rupee being one of the stable currencies, it has further room for depreciation. It may even touch 81 soon,” added Sugandha Sachdeva, vice-president, commodities and currency research at Religare Broking.


2. Investors choosing safer haven: Since the Ukraine-Russia war broke out, investors have shifted more towards safe haven like US. “Due to the dollar supremacy, the US never had to defend dollar. US by default was a stable market for investors. Moreover, after the war, investors tend to invest in the safe haven,” said Sankhanath Bandyopadhyay, economist, Infomerics Ratings.


3. Better rate of returns in the USA: Although, the Reserve Bank of India (RBI) has taken several measures recently to ensure foreign currency inflow. But it will take time to compensate the loss India has incurred in the past few years, according to analysts and economists. The rate of returns in the bond yields in the USA has been more compared to the rate of returns in any Indian investment, thus investors tend to invest less in the Indian market. “In countries like the US, for deposits with a tenure of two to five years, the rate is close to 3 percent and more,” said Ashutosh Khajuria, ED, Federal Bank. On the other hand, the rate was low for deposits like FCNR(B) in India.


4. Rate hike by the US Fed: The Federal Reserve(Monetary authority of USA) is expected to aggressively hike rates by 75 bps or point in the upcoming meet. “The recent inflation print in the US has raised the expectations of a more aggressive rate hike by the Fed, lending further strength to dollar,” added Shashank Mendiratta, an economist from New Delhi. Although the data of US inflation doesn't include the recent fall in crude prices the number continues to be very high. Moreover, lack of dollar inflows is also hurting the domestic currency as oil companies keep buying in the market, according to forex analysts. “markets are now pricing in a 100bps rate hike by the Fed later in the month. The same commentary has been reiterated by a few Fed officials after the US CPI(consumer price index)report. This coupled with increasing risks of a global recession have contributed to a strengthening US dollar (currently hovering at a 20-year high) which will put further pressure on INR,” said Aditi Gupta, economist, Bank of Baroda.


5. Borrowed inflation: Economists explained how borrowed inflation is taking a toll on the Indian economy. Due to Russia-Ukraine war, inflation is hitting hard on countries across the globe leading to currency depreciation in most of the countries. India, despite its preventive measures, will feel the hit of the same.

Comments

Post a Comment

Popular posts from this blog

LPG Concept: The Game-Changer for the Indian Economy

  The LPG (Liberalization, Privatization, and Globalization) concept has been a turning point for the Indian economy, transforming it from a state-controlled economy to a market-oriented economy. The introduction of this concept in the early 1990s was a paradigm shift for India, which had been under the license raj regime for almost four decades after independence. The LPG concept aimed at dismantling the state monopoly and encouraging private sector participation, reducing trade barriers, and integrating India into the global economy. This approach has brought about significant changes in the Indian economy and has helped India to emerge as a global economic powerhouse. Liberalization Liberalization was the first step in the LPG concept. It aimed at reducing the state's control over the economy and promoting private enterprise. The government abolished the License Raj regime, which had made it difficult for businesses to start and operate in India. This led to the emergen...
Post a Comment
Read more

Where is Saint Valentine now?

  Chocolates, flowers, and affectionate notes. A beheading and body parts scattered across Europe. Together, these add up to one thing: The world’s largest festival of love. Behind the rosy facade of Valentine’s Day is a mysterious and grisly tale of martyrdom, dismemberment, historical uncertainty, reliquaries, pilgrimage, and a dash of destination marketing. As the murky legend goes, in the third century a Catholic martyr was executed on February 14, supposedly for breaking a Roman ban on performing marriages. In his surprisingly active afterlife, the man became a well-traveled saint, as Ronan O’Connell reports. “In Dublin a church claims to exhibit St. Valentine’s heart; in a Rome basilica his supposed skull is displayed (pictured above); in a Glasgow friary his skeleton sits in a golden box; in a Prague basilica his shoulder bone is an attraction; and in a Madrid church his remains are encased in glass,” writes O’Connell. “All in all, a dozen Catholic churches in Europe trade h...
2 comments
Read more

May’s Full Moon Comes with Supermoon Eclipse- NASA says.

Image Credit:  NASA May 26 is not only the day of first lunar eclipse of the year but also the day of the full lunar eclipse . Another rare cosmic scene will be seen in that day. During the eclipse, the moon will turn dark red. It is called Blood Red Moon .  Image Credit:  Forbes Such a scene is seen only once in many years. Scientists call this special event The Super Lunar Event . Because there will be a super moon, there will be a lunar eclipse and there will also be a red moon. The first lunar eclipse of the year is going to get a special dimension in the trinity of these three. The moon orbits the earth in an elliptical orbit. The distance to the moon decreases when it moves to the middle of the chamber. Then the moon looks bigger.   Image Credit:  NHM When the earth moves between the sun and the moon while orbiting, its shadow falls on the moon. That is why the lunar eclipse. A lot of the time it falls on the moon...
1 comment
Read more