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Rupee hits all-time low against the US dollar: why is it falling and what may it lead to

The India rupee fell to an all-time low of 69.03 against the US dollar on Thursday compared to its previous record low of 68.86 on November 24, 2016. The nosedive came while maintaining a 19-month low. This is the fourth consecutive day of fall for the rupee.

The things which have affected the rupee fall:

  1. India being a net importer of crude oil, rising crude oil price is not good for the country as it will impact current account deficit and put pressure on the rupee. Oil prices in the global market inched up with US crude futures rose $.23 to settle at $72.76 a barrel. Brent crude rose $1.31 to settle at $77.62 a barrel.
  2. Currency traders are worried about the future of global trade against the grim backdrop of an increasing trade rhetoric between the US and China.
  3. Foreign investors have been net sellers of Indian equities and debts this year so far putting pressure on the rupee.
  4. Further, on the trade front, concerns of a trade-war like situation between the US and other major economies such as China and the European Union also kept sentiments weak across markets.
  5. The currency market was nervous after RBI painted a gloomy picture of the banking sector in its bi-annual financial stability report.

Listed few points that how the weak rupee will affect you:

  1. While a weakening rupee will leave the Indian exporters smiling, importers, however, will feel the pain. According to latest government data, India’s trade deficit stood at $14.6 billion in May, 5.6 per cent higher than a year ago. A falling rupee will only widen this gap.
  2. Oil imports will get costlier, translating into higher fuel costs.
  3. The rupee downfall will expand India’s import bill and will eventually be contributing to the inflation. In a scenario, where inflation further goes up then there are chances that RBI may hike rates resulting in your EMIs outflow.
  4. The current low is also a bad news for students aspiring to study abroad, as lower rupee value will lead to higher education costs. Travelling out of India will also become expensive.

However, if any Indian owns any property on foreign land, then there’s a ray of hope as a weak rupee will increase the value of your investment.

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OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

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