Why indian rupee is falling

Mumbai, India – Chakradhar Chemicals, a medium-sized company that manufactures micronutrient and soluble fertilisers and farm equipment, has braved a lot so far this year. A surge in the cost of imported raw materials – metals and plastic – and a plummeting rupee slashed its profit margins drastically. But when asked if there is a panic now that the rupee stands at the threshold of 80 to a dollar, and may soon fall further, Managing Director Neeraj Kedia says he isn’t losing sleep over it. The calm is not unfounded. Raw material prices have normalised, and a similar depreciation in the currencies of his trade partner China have helped offset the hit to his business from the rupee’s fall. Kedia says if the rupee falls further in the coming days, he may have to compromise on profit margins for a few months, but the long-term impact on his business will be negligible. “Unless it falls to 85-a-dollar levels… then we will be in trouble,” he says. The rupee has fallen rapidly to 79.97 a dollar – from 77.64 at the end of May and 74.55 on February 23, a day before Russia invaded Ukraine. It has already tested a record low of 80.0575 twice this week, recovering when the Reserve Bank of India stepped in to support it. Kedia says that while a drop of 1.5 rupees in the last two months sounds like a lot, in percentage terms it is only 2 to 3 percent and, while that pressures his margins for some months, he expects things to stabilise after that. “I don’t see a reason to raise my blood ...

A vendor counts Indian currency notes at a vegetable market in Mumbai, India, Aug. 30, 2018. (Xinhua/Stringer) Indian rupee has fallen to a record low against the US dollar. The rupee declined last week against the US dollar and is currently close to inching toward 82. In 2022 so far, the rupee has depreciated 8.9 percent against the US dollar. India's central bank, the Reserve Bank of India (RBI), has burnt forex reserves at a dramatic pace this calendar year to prevent exchange rate volatility, an intervention aimed at defending the currency at a particular level. According to a report in the local daily Business Line, as the RBI sold dollars to arrest the fall of the rupee, India's forex reserves depleted the most among all emerging economies. Since the beginning of 2022, India's reserves have fallen 13.88 percent from 633.6 billion US dollars to 545.6 billion US dollars as of Sept. 16. WHY RUPEE IS FALLING A multitude of factors, including the ongoing Ukraine crisis, the raising of interest rates by the US Federal Reserve, investors selling Indian stocks to buy foreign ones, are believed to be the reasons behind the falling rupee. Financial experts argue that as inflation rises across the world and domestic growth slows, investors usually look to sell their Indian assets and put the money into the US markets for better safety and returns. The rupee is falling against the dollar primarily because of the growing trade deficit that imports are increasing at a much higher ...

The rupee witnessed a fall of 51 paise, hitting an all-time low of Rs 77.41 against the US dollar, during early trade on Monday despite the currency witnessing a rise in the immediate aftermath of the Reserve Bank of India (RBI) hiking interest rates on May 4. At the interbank foreign exchange, the rupee opened at 77.17 against the dollar but soon slipped past the previous record low of 76.98 seen in March. The rupee has depreciated by 1.2 percent in May so far. Here are some of the reasons and implications of the currency movement. Easy monetary policy by Asian countries: The inability of countries like Japan and China to design their monetary policy to align with rising the US Federal Reserve rates has affected the value of their currencies and with other major Asian currencies performing poorly, the rupee was bound to be affected. “There may not be an absolute correlation but if the Chinese currency is deteriorating, other Asian currencies may not react positively. The Chinese currency has depreciated much in the last few days as the People’s Bank of China (PBOC) has used the easy monetary policy system,” said Arnob Biswas, head of forex research, SMC Global. But now, the effect of poor-performing Asian peers is visible on the rupee too. In the recent past, currencies like the Chinese yuan or Japanese yen have fallen drastically. Like PBOC, Bank of Japan has fallen behind in tailoring its monetary policy to keep pace with global economic volatility. According to experts...

“The second wave of the Covid-19 pandemic has resurfaced concerns over the Indian economy and it is expected to see slow growth. Additionally, rising crude prices, weakening foreign fund inflows amid a strengthening dollar and rising US 10-year bond yields also impacted sentiments,” said Ajay Kedia, Dierctor, Kedia Advisory.

MUMBAI, June 8 (Reuters) - The Indian rupee is poised to open lower on Thursday, pressured by the Chinese yuan-led fall in Asian currencies, while awaiting the Reserve Bank of India's decision on interest rates. Non-deliverable forwards indicate the rupee will open at around 82.60 to the U.S. dollar, compared with 82.5475 in the previous session. "There is not much to read into the likely higher opening (for USD/INR)," a trader said. "Let's hear from the RBI, though I think the outcome is more likely to move premiums than spot." The RBI is widely expected to keep the key policy rate at 6.50% in its decision at 10.00 a.m. IST. The focus will on comments around the trajectory of interest rates and inflation. A few economists have not ruled out the possibility of the RBI changing its policy stance to "neutral". A change in stance would lead to "another dip in premiums", the trader said. The 1-year USD/INR forward implied yield is hovering just above its lowest level this year. The offshore Chinese yuan dropped below 7.1550 to the dollar, the lowest since November last year, on concerns over China's economic outlook. May trade data released on Wednesday revealed a slump in exports, which alongside weak activity data suggested that Chinese growth was faltering. The jump in U.S. yields on the back of a surprise rate hike by Bank of Canada (BoC) further weighed on the yuan and other Asian currencies. The BoC, which has been on hold since pausing rates in January, raised them by 2...

From trading at a level of 72.38 to USD on March 22, the Rupee slipped to levels of 75.42 on Tuesday (afternoon trading hours) thereby witnessing a decline of 4.2 per cent in a matter of three weeks. On Tuesday, it lost 43 paisa to a dollar, hitting a nine-month low. Data shows the Rupee has been one of the biggest losers over the last three weeks as concerns are growing over rising Covid cases and its impact on economic activity across the country. The Rupee has been one of the weakest emerging market currencies over the last three weeks as has lost 4.2 per cent since March 22 against the dollar. In the same period, only the Turkish New Lira has lost more than the Rupee as it declined 4.36 per cent against the dollar. While Brazilian Real has lost 3.99 per cent in the same period, Russian Ruble has weakened by 3.25 per cent. Thai Baht and Indonesian Rupiah have lost 2.33 per cent and 1.5 per cent in the same period against the dollar. Currency movement against USD What are the key reasons for the decline? Also in Explained | Besides, the strengthening of dollar in line with expectations of better growth in the US economy, has also put pressure on the Rupee. While the Dollar was trading at 1.233 to a Euro in early January 2021, it is currently trading at 1.189 to a Euro and has gained over 3.5 per cent. Since March 1, 2021, the Dollar has gained close to 1.5 per cent against the Euro. Last week, RBI’s announcement of G-SAP programme to infuse liquidity has also put additio...

MUMBAI, Sept 22 (Reuters) - The Indian rupee is likely to fall further after hitting a record low to the dollar on Thursday as the U.S. Federal Reserve hinted at more aggressive rate hikes to tame inflation. The rupee opened at a record low of 80.2850 per U.S. dollar, down from 79.9750 in the previous session. The Fed raised rates by 75 basis points, in line with expectations. More importantly, it hinted that more hikes were coming and that rates would stay elevated until 2024. Asian currencies opened weaker, with the Chinese yuan slipping below 7.10 to the dollar. "After the hawkish Fed Reserve commentary, the rupee is (set to fall)", said Anil Bhansali, head of treasury at Finrex Treasury Advisors. "The intervention from the central bank will remain crucial and they are expected to be present through the day. However, they may allow a closing for the pair above 80 today." Samir Lodha, managing director at QuantArt Market Solutions, reckoned that more losses were in store for the rupee if the RBI decides to step back. "Once RBI allows INR to trade beyond 80 on a consistent basis, I expect rupee to head towards 82.0 in a couple of months on account of the trade deficit and due to global recession and money supply tightening," Lodha said. It is possible that "rupee will depreciate further with RBI intervention to control it whenever required," said Venkatakrishnan Srinivasan, founder and managing partner at Rockfor Fincap. However, any possible intervention by RBI may be le...