{"id":30817,"date":"2024-10-14T18:51:38","date_gmt":"2024-10-14T13:21:38","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=30817"},"modified":"2024-10-14T18:51:40","modified_gmt":"2024-10-14T13:21:40","slug":"rupee-hits-an-all-time-low-of-84-against-the-us-dollar","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/14-10-2024\/rupee-hits-an-all-time-low-of-84-against-the-us-dollar","title":{"rendered":"Rupee Hits an All-Time Low of 84 Against the US Dollar"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Indian rupee has recently crossed the 84 mark against the US dollar, marking an all-time low.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Currency depreciation<\/strong> refers to the decline in the value of one country\u2019s currency relative to another currency.\u00a0<\/li>\n\n\n\n<li>The Indian rupee has seen a periodic depreciation against major currencies, particularly the US dollar.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons for depreciation of rupee<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Rising Crude Oil Prices: <\/strong>The surge in global crude oil prices has led to increased import bills for India, thereby exerting downward pressure on the rupee.<\/li>\n\n\n\n<li><strong>Outflows to China:<\/strong> Foreign portfolio investors (FPIs) have shifted their investments from India to China, driven by the latter&#8217;s recent monetary and fiscal measures aimed at stimulating its economy.\n<ul class=\"wp-block-list\">\n<li>This trend reflects a \u2018<strong>Sell India, Buy China<\/strong>\u2019 strategy, causing a reduction in demand for the Indian rupee.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Increased Demand for US Dollars:<\/strong> There has been a heightened demand for the US dollar from foreign banks, exacerbating the rupee&#8217;s depreciation.<\/li>\n\n\n\n<li><strong>Weak Domestic Markets: <\/strong>The overall weakness in domestic equity and bond markets has further contributed to the rupee&#8217;s decline, making it less attractive to foreign investors.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Impact of Rupee depreciation<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Exports and Imports:<\/strong> While a weaker rupee can <strong>boost exports<\/strong> by making Indian goods cheaper for foreign buyers, it also <strong>raises the cost of imports<\/strong>, particularly essential commodities like oil and machinery.\u00a0<\/li>\n\n\n\n<li><strong>Foreign Debt Servicing:<\/strong> For companies and the government with significant foreign currency debt, a depreciating rupee <strong>increases the cost of servicing<\/strong> the debt, straining their financial positions.<\/li>\n\n\n\n<li><strong>Inflation:<\/strong> The increase in import costs lead to higher consumer prices, impacting purchasing power and potentially leading to <strong>overall inflation in the economy<\/strong>.<\/li>\n\n\n\n<li><strong>Investor Sentiment:<\/strong> A declining currency affects investor confidence, resulting in <strong>reduced foreign direct investment (FDI)<\/strong> and further capital outflows.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How does the RBI maintain the rupee value?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Intervention in Forex Markets: <\/strong>The RBI intervenes in the foreign exchange market by buying or selling dollars to stabilize the rupee&#8217;s value. This helps mitigate excessive volatility.<\/li>\n\n\n\n<li><strong>Monetary Policy adjustments:<\/strong> By adjusting interest rates, the RBI influences capital flows. Higher interest rates can attract foreign investment, supporting the rupee&#8217;s value.<\/li>\n\n\n\n<li><strong>Forex\u00a0 reserve management: <\/strong>The RBI maintains a buffer of foreign exchange reserves that can be utilized during times of currency volatility.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Long-term investment:<\/strong> A stable rupee requires steady capital inflows. India should focus on attracting long-term foreign direct investment (FDI) rather than volatile foreign portfolio investments (FPI).<\/li>\n\n\n\n<li><strong>Maximizing Remittances:<\/strong> India is one of the largest recipients of remittances globally. Policies that make it easier for Non-Resident Indians (NRIs) to remit money home, can increase foreign currency inflows, stabilizing the rupee.<\/li>\n\n\n\n<li><strong>Export Competitiveness:<\/strong> The focus should be on enhancing the competitiveness of Indian exports by investing in sectors like technology, pharmaceuticals, textiles, and manufacturing.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/business\/rupee-hits-an-all-time-low-of-84-against-the-us-dollar-factors-leading-to-the-fall-9617735\/\" target=\"_blank\" rel=\"noopener\"><strong>IE<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Indian rupee has recently crossed the 84 mark against the US dollar, marking an all-time low.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-30817","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/30817","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=30817"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/30817\/revisions"}],"predecessor-version":[{"id":30818,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/30817\/revisions\/30818"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=30817"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=30817"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=30817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}