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Mumbai:

Rupee Hits Its Lowest Level: Amidst the strong trend of the American currency and the rise in crude oil prices, the rupee fell to an all-time low of 86.31 against the US dollar during trading on Monday. This is the biggest fall in the local currency in almost two years. The Indian currency has fallen by more than one rupee in the last two weeks from the closing level of 85.52 per dollar on December 30.

The rupee opened at 86.12 in the interbank foreign exchange market. During trading, it reached its lowest ever level of 86.31 against the dollar. The rupee fell by 18 paise and closed at 86.04 against the US dollar on Friday.

Meanwhile, the dollar index, which gauges the US dollar’s position against six major currencies, stood at 109.60, up 0.11 per cent. The yield on America’s 10-year bond increased to the level of 4.78 percent in October 2023. International standard Brent crude stood at $ 80.92 per barrel with a gain of 1.42 percent.

Why is the rupee falling?

A sharp decline is being seen in the currencies of the world including India. Why is the rupee falling? Why has it reached an all time low? And what is the loss due to falling rupee? According to Vikas Sinha of NDTV Profit, this fall in the stock market is an imported fall. Now let me explain why I am saying this. Because of US we are falling the most at this time. We are falling because of the things the US has done.

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There was hope in the US that there would be a rate cut. Fed will cut rates, but the expectation of Fed cutting rates has reduced, then the unemployment data that came there was quite encouraging. Unemployment has reduced significantly there. Now the impact of reduction in unemployment is that the rate cut which was expected is no longer expected. Now it seems that it may be postponed a bit, due to which all the markets other than India are being affected. The foreign investors will withdraw their money and shift it to the US market. Because it is a safe haven for them. They will get good returns there. If there was no rate cut, then a decline was going on because of it. Secondly, all the geo-political activities going on are definitely making an impact. Thirdly, the price of crude is continuously increasing. If you see now, crude has crossed even eighty dollars. So these are the three factors for the weakness of the rupee.

Air India also affected

According to stock market data, foreign institutional investors (FIIs) were sellers on Friday and sold shares worth a net Rs 2,254.68 crore. The fall in the rupee against the US dollar also puts pressure on the cost structure and profitability of the airline Air India. However, the airline has some natural defense as it can charge higher fares for international flights where tickets are priced in foreign currencies, a senior company official said. The Indian rupee has been falling in recent weeks and reached a record low of 86.04 against the US dollar on January 10. Operating expenses of airline companies increase due to weak rupee, as most of their costs are in dollars.

What is the loss due to falling rupee?

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Economist Mithali said that I feel that unless some investment announcements come from the Indian government, which I think will come at the time of the budget and there are still only two-three weeks left for the budget to come, then The market sentiment will be a little better, but till then we will definitely see that two to three weeks are going to be a bit difficult for us.

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Whenever the dollar is strong and our rupee is weak, it means that if you go to buy any goods from the foreign market, like crude, we buy it the most, then when we go to buy crude, we first buy it in dollar terms. We used to have to pay less rupees as per the calculations, now instead of that we have to pay more rupees because of the weak rupee. So its direct effect falls on Trade Deficit.

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This increases our trade deficit. When trade deficit increases and when we buy these things at a higher price, it gradually impacts the pockets of the common man and it affects all the things. If you are buying something expensive then all the things related to it will be expensive. All those things will become expensive in economic activity.

What is the benefit of falling rupee?

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Mithali further said that whenever the dollar becomes strong and the rupee becomes weak, you have to pay more to buy things than before. So if we understand one thing that the oil price we pay definitely becomes more expensive for us, but when the exchange rate falls, it means we have to pay more rupees for one dollar, then our exports. Those which are available become cheaper in the global market.

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So for example, if you are exporting steel, you are exporting food items, they all become cheaper in the global market and whoever is buying from us by paying dollars, then we definitely see that there is an impact. That our exports increase.

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And if we look at the data of the last one year, we have seen that our exports have increased by six percent, but imports have fallen by two percent, that is, net exports have increased by eight percent.

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So actually India is benefiting from having this version of exchange rate. This means that we are actually getting a lot of net benefit from this exchange rate and our exports are increasing. So I feel that there is no need for RBI to intervene in the monetary market right now.


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