Why is Rupee falling Against Dollar: Reasons & Affect

by Puja Gupta Blogger

The rupee is currently at an all-time low, fallen by nearly 4% in the span of a month. A weak rupee not only results in a weak currency exchange but also has a negative impact on the country and its importers. Though this situation is being watched by the Reserve Bank of India, the value of the rupee is continuously falling. Dollar and the Rupee is at its lowest. People are scrambling to find money exchange locations.

The decline in the value of the Rupee is not a sudden occurrence. Between June-September 2018, the Indian Rupee has depreciated by 12%. What are the reasons for the depreciation of the Indian Rupee against the US Dollar?

Widening trade deficit: The latest data released by the Trade Ministry states that the country’s trade deficit hit a 5-year high in July, amounting up to $18.02 billion. The reason is surging oil imports – imports increased by 57% YoY amounting to $12.35 billion. The total imports increased by 28.81% to $43.79 billion, whereas exports only increased by 14.32% to $25.77 billion. This combination of the ever-rising import bills and the slowing export growth has led to a deadly situation – the worsening of India’s current account deficit (CAD). A high deficit is a bad news because the country has to sell rupees and buy dollars to pay their debts, which leads to a further reduction of the value of the rupee.

Trade wars between superpower countries:: A constant regulation change in the trade market has led to a trade war with China and European countries, resulting in the cost of the imported commodities to go up, which will further inflate the outflow of the dollar from the Indian market.

Unstable foreign flows: The volatility of the market is very unstable. A close watch is being kept on the stakeholders as any outflow by the Foreign Institutional Investor (FII) will widen the current account deficit (CAD).

To know another reason Why is the Rupee falling against Dollar & how does it impact you?, visit source article.

Source:https://www.sooperarticles.com/finance-articles/why-indian-rupee-continuously-falling-down-2018-1698686.html