New Delhi, October 12 (IANS). The rupee fell to its second all-time low in the interbank currency market on September 11. At the close of trading on the weekend, the price of one dollar crossed Rs 84. The reason for this decline is being attributed to foreign portfolio investors in the stock market.
The price of one dollar in the currency market was Rs 84.07. The historical low of Indian currency has been Rs 84.10 per dollar. Earlier on Thursday also it had closed at Rs 83.98 per dollar.
Mithali Nicore, economic expert and head of Nicore Associates, told IANS, “To understand the valuation situation of the Indian rupee in the interbank currency market, one has to look back a few years. The Indian rupee touched the level of Rs 80 per dollar for the first time in September 2022. There has been a gradual decline in these two years. The value of rupee in October 2022 will be between Rs 82 to Rs 83. Subsequently, the Reserve Bank of India (RBI) took extraordinary action in the global currency market, selling dollars and other foreign currencies, to keep the rupee at Rs 83-84 per dollar. Recently the Indian currency has crossed the level of Rs 84 per dollar and now its value is Rs 84.06 per dollar. It is important to understand the reasons behind this. There are two main reasons for the decline of rupee at present. First, there is the ongoing tension in West Asia. A large part of India’s foreign exchange and dollar reserves is used to import crude oil. Tensions in West Asia are making it difficult for India to import crude oil, especially from Iran. “Due to this situation, global oil prices may increase, which will put additional pressure on India.”
She adds, “The second reason is related to the activities of foreign portfolio investors (FPIs). When foreign investors invest money in the Indian stock market, they have to convert their currency into rupees. If the demand for Indian shares decreases or investors withdraw capital from the Indian market, the demand for rupee also decreases. There has been a net withdrawal of foreign capital worth about Rs 60 crore from the Indian stock market in the last two quarters, which has increased the demand for dollars and put the rupee under pressure.”
She concludes, “Although the RBI action is ongoing, it is trying to keep the value of the rupee stable by selling dollars in the market. But I believe that rupee devaluation is not completely negative. Devaluation can be beneficial for exporters, as it makes our products and services cheaper in international markets. “Thus, the RBI may also decide to continue with some devaluation, as this may be helpful in promoting export-led growth.”
–IANS
PSM/AKJ
