On Monday, the rupee breached the critical mark of 72.50 against the US
dollar. The rupee fall has occurred due
to the sustained buying of the American currency by banks and importers
The domestic unit of India plunged down by 85 paisa. The rupee fall hashit a new record low of 72.58 against the dollar.
Additional pressure was exerted on the local currency due to rising
crude oil prices and widened current account deficit. Fears of a possible
escalation in the US-China trade conflict also put a lot of pressure on the
rupee.
US President, Donald Trump issued a warning to China on Friday. He said
that he was ready to slap tariffs on virtually all Chinese imports to the
United States. This threatened duties on another $267 billion of goods in
addition to the $200 billion already facing a risk of duties.
Continuing global trade disputes has strongly contributed towards the
rupee fall. Lead Economist and Partner at Deloitte, India said that monetary
policy announcements by the Fed may have further led to investment re-routing
with a derived pressure on INR valuation.
The 10-year bond yield rose to its highest level since 2014. This has
been due to the worries of higher crude oil prices and weakening rupee that has
bolstered inflation concerns.
On Friday, the rupee rose 26 points and closed at 71.76 against the
dollar. This rise in the value of the rupee against the dollar came only after
seven days of depreciation. There was heavy intervention of the Reserve Bank of
India (RBI) in the foreign exchange market on Friday. They mounted a formidable
defense of the 72 rupee to the dollar mark.
The
rupee fall has been hard this year. Fears of inflation are still up and about.
The only thing to do is to wait and hope that the value does not fall beyond an
inescapable limit.
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