India Rupee Falls Below 79/$ For First Time Ever; What To Expect?

Rupee To Dollar: Indian Rupee hit a lifetime low of 79.12 per USD on Friday. The speedy exit of FIIs from Indian markets, coupled with weak macro indicators are some of the reasons being stated for this

New Delhi: Indian Rupee, on Friday, fell below the 79 per USD mark for the first time ever. In the past couple of days, the Indian currency has hit an all-time low-level several times. However, this is the first time it has fallen as low as 79 per USD. According to market data, it hit 79.12 against 1 USD after opening at 78.98 per dollar. The Reserve Bank of India (RBI) has been trying to stop the free fall of the Indian currency with several interventions.

Finance Minister Nirmala Sitharaman, on Thursday, stated that India is in a ‘relatively better’ position economically. The most important reason for the rupee’s fall is the quick sell-off by the Foreign Institutional Investors (FIIs) in the Indian Markets. For months, they have stayed as the net sellers in the Indian markets. This reduces the availability of Dollars in the Indian economy, making them dearer.

Is the Government Trying To Stop The Freefall?

The government has taken several steps in order to support the currency. On Friday, it announced a hike in the customs duty on gold and a rise in the taxes on the export of petrol, diesel as well as ATF. On petrol exports, the tax was increased by Rs 6 per litre. Whereas on Diesel, it was hiked by Rs 13 per litre. These prices may not have any impact on the domestic prices of fuel but it is expected to control the foreign trade in order to control the fall of the rupee.

Also, the import tax on gold was hiked from 7.5 per cent to 12.5 per cent. If the imports are reduced, the demand for the dollar will also reduce in the economy, leading to a stop in its skyrocketing value.

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What To Expect?

Several experts have been quoted in reports as saying that the Rupee may stay near 79 in the short-term or it may even fall to as low as Rs 80 per USD. But in the medium term, it will recover. This will be quicker if Russia Ukraine is resolved and supply chain restrictions are lifted.