Rupee Falls To 84.76 Against Dollar: Key Reasons And How It Impacts You – haroonabadvital.com
One of the main reasons for the depreciation of the Indian rupee is the widespread strength of the US dollar
On Monday, the rupee depreciated by 12 paise to close at an all-time low of 84.72 against the US dollar. (representational image)The rupee fell by 4 paise to an all-time low of 84.76 against the US dollar in early trade on Tuesday, as strength of the US currency in the offshore market and sustained foreign portfolio inflows weighed on investor sentiment.
Forex traders said the rupee depreciation was largely due to Donald Trump’s rhetoric on BRICS, political instability in the euro zone, weaker domestic macroeconomic indicators, and persistent foreign portfolio outflows.
President-elect Donald Trump on Saturday threatened to impose 100 percent tariffs on BRIC countries if they move to undermine the US dollar.
Moreover, market participants are also awaiting signals from the Reserve Bank of India’s upcoming monetary policy on December 6, which is likely to focus on balancing inflation and growth.
At the interbank foreign exchange market, the rupee opened at 84.75, moved in a narrow range, and touched an all-time low of 84.76 against the dollar, registering a decline of 4 paise from its previous close.
Daja costs are rising
“As a weak rupee increases the cost of imports and may lead to higher inflation rates, the recent decline in the Indian rupee against the US dollar has important implications for the Indian economy,” said Pravesh Gaur, chief technical analyst at Swastika Investmart.
Impact on customers
Qur pointed out that customers may be harmed and their purchasing power diminished. He added that the increasing cost of servicing debts in foreign currency represents a hardship for companies that have such debts.
An expensive affair
Gaur noted that Indian companies may find it more expensive to raise funds from abroad if the value of their currency declines as that may undermine investor confidence.
“The timing of the rupee reversal is unpredictable and depends on a number of variables such as the rupee may benefit from a downturn in the US economy or a weaker US currency. Rupee stability can be achieved supported by stronger economic development and better export results. The rupee can be supported through intervention,” Gaur said. Reserve Bank of India in the foreign exchange market, although this is a temporary solution.”
“It is important to remember that the economy does not always suffer when the rupee falls. This may be a natural response to changing international economic conditions. On the other hand, economic instability may result from excessive devaluation of the currency. The key is to balance the risks and rewards of managing the exchange rate.” .
On Monday, the rupee depreciated by 12 paise to close at an all-time low of 84.72 against the US dollar.
The dollar index, which measures the strength of the US currency against a basket of six currencies, was trading up 0.07 percent at 106.51.
Brent crude, the global oil benchmark, rose 0.18 percent to $71.96 a barrel in futures trading.
What did the government say?
Meanwhile, Minister of State for Finance Pankaj Chaudhary on Monday said in Parliament that the rupee remains one of the best-performing Asian currencies despite geopolitical tensions in the Middle East and other headwinds, indicating India’s sound economic fundamentals.
He said that one of the main reasons for the depreciation of the Indian rupee is the widespread strength of the US dollar.
“During the Cyprus year 2024, the dollar index rose by about 4.8 percent through November 19, 2024. Most recently, the dollar index touched 108.07 on November 22, 2024, its highest level in more than a year, putting pressure on emerging market currencies.” He said.
Furthermore, geopolitical tensions in the Middle East and uncertainty surrounding the US election results have increased headwinds.
The depreciation of the currency is likely to enhance the competitiveness of exports, which in turn affects the economy positively. On the other hand, a devaluation of the currency may raise the prices of imported goods.
He also said that the Reserve Bank of India is monitoring key developments around the world which may have an impact on the US dollar versus Indian rupee exchange rate.
(with PTI inputs)
