Why Did Indian Rupee Fall To All-Time Low Against Dollar On Monday? | Explained

Rupee to Dollar: According to data, the value of the Rupee against the Dollar has eased a little on Tuesday, rising to Rs 77.23 per USD. We look at why the value of the Rupee has diminished in the past few days.

Rupee | New Delhi: The value of the Indian Rupee fell to its all-time low against the Dollar. It closed at 77.50 per dollar on May 9. The all-time low record was Rs 77.05 per dollar. On Tuesday, however, the value had recovered marginally and the rupee vs dollar was somewhere at Rs 77.23 per dollar. But what led to the sharp fall of the Rupee against the Dollar in the last few days?

Why is the Indian Rupee shaky against the Dollar?

• US Fed Rate Hike and Inflation: The rising treasury yields in the US are one of the major reasons for this. This is happening as inflation has breached multi-decade levels. The value of the Dollar is also rising owing to the rate hike by the Federal Reserve and it is expected to go up further in the coming days.
• Covid in China: China has the maximum forex in the whole world. Its forex reserves are larger than India’s GDP. With China’s zero-Covid policy, the major cities of the country are under strict lockdown. This has led to difficulty for a lot of companies in India dealing directly with their neighbour.
• Multiple factors in India: In India, the value of the rupee is depreciating due to massive selling by foreign investors. For the seventh month, they have been the next sellers in the Indian markets. This has pulled the markets down. Also, the rate hike by the RBI, which may be done again next month, has also made things worse for the markets.

How does the falling value of the Rupee have a direct impact on us?

The impact of the falling value of the rupee can be understood by the following points:

If Rupee falls,

• Imports become cheaper, Exports become costlier
• Studying and travelling abroad gets costlier.
• May raise inflation in the short term
• Increase in investment by foreign investors.

What to expect now?

According to Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank, “India has witnessed FYTD23 FPI outflow of US $5.8 billion. Led by adverse global cues, the rupee is trading shy of 77.50 — nearly 2% lower from highs of near 75.99 levels witnessed last week post the surprise rate hike by RBI. Given the uncertainty and limited RBI intervention, USDINR could trend towards 78 levels in the immediate near term. We expect the new USDINR near term range of 76.50-78 in the near term.”