hear the news
Expansion
Slowdown in domestic equity markets and frequent foreign fund outflows weighed on investor sentiment. Due to this, the rupee fell by 13 paise to close at an all-time low of 78.17 (provisional) against the US dollar on Wednesday. The Indian currency opened at 77.99 at the interbank forex market and finally closed at its all-time low of 78.17, down 13 paise from its previous close of 78.04.
Fed Reserve may raise rates
Gaurang Somaiya, Forex and Bullion Analyst at Motilal Oswal Financial Services, said the US central bank is likely to hike interest rates by up to 50 bps. Hawkish remarks may support the dollar at lower levels. Major currencies remained under pressure following broad gains in the dollar. Meanwhile, benchmark Brent crude futures fell 1.07 per cent to $119.87 per barrel.
Foreign investors continue to sell
Looking at the domestic stock market, the BSE Sensex closed 152.18 points or 0.29 per cent lower at 52,541.39, while the broader NSE Nifty closed 39.95 points or 0.25 per cent lower at 15,692.15. Foreign institutional investors continued their sell-off, selling shares worth a net Rs 4,502.25 crore on Tuesday, according to stock exchange data.
Rupee may reach the level of 81
Significantly, on Monday, the first trading day of the week, there was a big fall in the Indian currency rupee. As soon as the market started, it had broken 28 paise against the dollar and reached the level of 78 for the first time. The trend of decline continued on Tuesday as well, while on Wednesday this decline increased even more. Amid the continuing fall in the rupee, a report quoted experts as saying that the rupee may hit an all-time low of 81 against the dollar in the coming days.
Selling has a big impact
Experts say that when there is turmoil in the international markets, investors turn towards the dollar. When the demand for the dollar increases, then the pressure on other currencies increases. Talking about the uncertainty around the world, due to the Corona epidemic and the ongoing war in Russia-Ukraine, there has been a supply interruption, which is going to create chaos around the world. People look for safe havens when there are times of uncertainty and the dollar is considered a safe haven. Selling by foreign investors affects the foreign exchange reserves and increases the demand for the dollar, while the demand for the rupee decreases.
Major impact of weakness in rupee
Significantly, India is dependent on imports from other countries for gadgets including mobile-laptops along with essential electric goods and machinery. Most mobiles and gadgets are imported from China and other East Asian cities and most of the business is done in dollars. If the rupee continues to depreciate like this, imports will become costlier in the country. Due to imports from abroad, their prices are sure to increase, which means inflation on mobiles and other gadgets will increase and you will have to spend more. Also, let us tell you that India buys 80 percent of its crude oil from abroad. It is also paid in dollars and due to the cost of dollars, the rupee will cost more. Due to this, freight will be expensive, due to its effect, inflation will be hit further on everything needed.
