Rupee
Rumki Majumdar, economist at financial consulting company Deloitte, believes that the rupee will now improve somewhat and it will remain between 85 to 86 per dollar in the coming weeks. He said that the Reserve Bank of India (RBI) is continuously paying attention to keeping the domestic currency stable. However, he said that despite RBI intervention and the Indian currency being more stable than other currencies, the rupee will not fall to the level of 83 now. Last week, the rupee had fallen to its all-time low of 86.70 per dollar. The reason for this was the withdrawal of foreign funds and the decline of domestic stock markets which affected the sentiment of investors.
Rupee had reached historical low of 86.70
On January 13, the rupee had recorded its biggest single-day fall in almost two years and at the end of the session, the rupee fell by 66 paise and closed at its historic low of 86.70 against the US dollar. Earlier on February 6, 2023, the rupee had fallen by 68 paise, the biggest one-day fall. The rupee is set to depreciate by nearly three per cent in 2024 due to a strong dollar and FII withdrawals. So far in the year 2025, the domestic currency has declined by more than one percent. On Friday, the rupee had closed at 86.60 per dollar. Majumdar said that I am sure that till six months ago the rupee was definitely at 83-84. But now it will be stable at 85-86 per dollar only.
What is the reason behind the falling rupee?
The current decline in the rupee is mainly due to the outflow of money from India by foreign investors, which has put pressure on the rupee. Global investors are moving their investments around different countries as central banks are readjusting their monetary policies at different levels. Apart from this, the US dollar index is continuously strengthening. The dollar index, which measures the strength of the dollar against six currencies, has increased to 109.01. The yield on 10-year American bonds also increased to the April 2024 level of 4.69 percent. Its effect is also visible on the Indian rupee. Due to this the rupee is continuously weakening.
What will be the impact of rupee collapse?
The falling rupee affects the Indian economy, the general public and the business world. Due to weakening of rupee, importing from abroad becomes expensive. Due to this the prices of essential commodities increase. India imports crude oil on a large scale. Importing crude oil will become expensive due to the strong dollar. This will increase trade deficit. Due to weakening of rupee, foreign investors withdraw money from the stock market. Its effect is visible now. Due to the falling rupee, the budget for foreign travel or studies abroad will increase. At the same time, Indian exporters benefit from the weakening of the rupee, because their products become cheaper in the foreign market.
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