So far in the month, the rupee has shed close to a per cent against the US dollar because of the worries on the import bill sparked by hardening oil prices and as global central banks are increasingly talking of tightening monetary policies. The rupee settled at The currency and bond markets were shut on Tuesday for Eid-e-Milad. So far in the month, the rupee has depreciated around 1.
So far this month, the rupee has depreciated around 1. For the coming week, the rupee would closely track the Dollar Index and crude oil prices which are trading at crucial levels of The rupee, which has shed close to 1. A slide of 3. The rupee on Wednesday closed at With some foreign banks stepping in to sell the dollar on behalf of exporters, the rupee touched a high of The domestic currency on Tuesday settled at With the rupee now heading towards the psychologically significant The rupee on Monday closed at Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.
ETMarkets caught up with two experts on the Indian currency to take a look at what is the road forward for the rupee. Forex traders said concerns over rising Covid cases and foreign fund outflows also weighed on investors' sentiment. Have you read these stories? In the floating exchange rate regime, the correct term would be appreciation.
Note: Altering the face value of a currency without changing its foreign exchange rate is a redenomination , not a revaluation. Remember that we were following a fixed rate system till We had partial controls on currency market till when as per IMF standards we liberalized our entire economy. It should not be forgotten that the exchange rate of a currency is not really an indicator of the economic strength of a country.
Also, the economic position of India in is far better than that of , though there is a fall in Rupee value. At present what should worry the Finance Minister and RBI governor should not the falling Indian Rupee, but the fluctuations in the currency market.
What India needs is stabilization of Indian Rupee value, be in Rs. But if rupee is Rs. Such a situation is not good for the economy and that will only trigger more fall in Indian rupee. UPSC has often asked this question — directly and indirectly — how does a fall in rupee affects exports and imports? Answer: They do it mainly to improve the balance of trade or in other words, to increase exports and decrease imports! A devaluation means that more local currency is needed to purchase imports and exporters get more local currency when they convert the export proceeds the foreign exchange that they get for their exports.
In other words: imports become more expensive; importers lose money while exporters earn more money. Know more. This is supposed to discourage imports — and to encourage exports and, in turn, to reduce trade deficits. Well, that was an explanation with respect to the local currency angle. Assume that India is the exporting country and America as the importing country. India exports apples to America. Assume that India devalued India rupee from Rs.
The cost of an apple in India before and after rupee devaluation is Rs. Now analyse what will happen. Think from the American perspective. In , the Trump administration labeled China a currency manipulator, saying Chinese officials were purposely devaluing its currency, leading to unfair advantages on trade. Sudden bouts of currency depreciation, especially in emerging markets, inevitably increase the fear of " contagion ," whereby many of these currencies get afflicted by similar investor concerns.
Among the most notable was the Asian crisis of that was triggered by the collapse of the Thai baht that caused a sharp devaluation in most Southeast Asian currencies. In another example, the currencies of nations such as India and Indonesia traded sharply lower in the summer of as concern grew that the Federal Reserve was poised to wind down its massive bond purchases.
A combination of factors led to the depreciation. First, investors grew fearful that Turkish companies wouldn't be able to pay back loans denominated in dollars and euros as the lira continued to fall in value. The lira plunged sharply after Trump released the news via a tweet. Turkey's central bank finally lifted interest rates in September from More recently, in , the lira has been significantly depreciating due to geopolitical risks as a result of Turkey's policies in the Middle East and elsewhere.
In October , the Lira sank to historic lows. It dropped beyond 8. Board of Governors of the Federal Reserve. Yahoo Finance. NYB , Historical Data. XE Currency Charts. Department of the Treasury. Federal Reserve Bank of San Francisco.
Peterson Institute for International Economics. Accessed Jan. Central Bank of the Republic of Turkey. How does the depreciating rupee impact your finances Updated: August 24, AM. Rupee depreciation would not impact your long-term portfolio if it is well-diversified. Dow 30 closes above for first time in years — Know how to invest in index stocks. Stock Market.
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