On Monday – the first trading day of the week – the rupee hit its all-time low against the US dollar. Today, on May 18, the Indian Rupee weakened against the US Dollar and touched a historic low of 96.283. During intraday trading, the rupee briefly fell to 96.18 per US dollar – a decline of about 0.2 per cent from its previous closing price. The fall broke its previous record low of 96.1350.
What is the connection between rupee fall and crude oil?
India imports about 85 percent of its crude oil requirement from other countries. When crude oil prices go above $111 per barrel in the international market, India’s import bill increases. As a result, Indian oil importers face huge demand for US dollars to meet their payments. Amidst this rush to buy dollars in the market, the value of the rupee starts falling rapidly against the dollar.
Effect of Trump’s new warning
On his social media platform, Truth Social, Trump wrote: “Time is running out for Iran. They would be wise to move quickly toward a deal; otherwise, they will be devastated. Time is running out.” After this latest warning, global investors are reluctant to take risks. As a result, they are pulling their capital out of the Indian stock market and investing it in the US dollar – widely considered a “safe haven” – putting downward pressure on the rupee.
What effect will this have on the common man?
As the rupee weakens, everything from studying abroad to getting medical treatment abroad will become expensive. You’ll now have to spend more dollars than ever to cover expenses like airfare or tuition fees.
A weak rupee will also increase prices of imported goods in India, including mobile phones, laptops, laptop parts and automobile parts.
With the dollar becoming expensive, domestic transportation costs in the country will increase. As a result, everyday essentials will become more expensive.