The Indian rupee is facing its worst fall in four years. Since the beginning of 2022, The currency is down more than 7% against the US dollarweak past Historical low of 80 to one dollar mark earlier this week. While the Indian currency is not the only one to underperform against the greenback, even the historically strong euro and the British pound are becoming weaker and weaker than the rupee, the fact is that other currencies are also doing well. Can be worth significantly less against the dollar. Only provide cooling comfort to the real economy of India. Domestic manufacturers and service providers are now facing not only high dollar prices for raw materials, equipment or other supplies they may need to purchase from abroad, due to the pandemic and war in Ukraine. Due to supply disruption. But they also face rising import bills – the slide means they will have to pay more rupees for the same dollar price a few months ago. The finance minister and the RBI governor have sought to explain the near-term reasons for the pressure on the currency and allay fears that the rupee could be in a ‘free fall’, a scenario that could ultimately lead to rapid macro-economic stability. may prove harmful. Imported inflation comes at a time when both fiscal and monetary authorities are battling to contain runaway inflation.
While the minister’s statement in the Lok Sabha cited factors including Russia-Ukraine conflict and rising crude oil prices as key drivers of the rupee’s depreciation, Governor Shaktikanta Das on Friday acknowledged concerns about the rupee and the fact pointed out that foreign portfolio investors were “selling assets and rushing to safe havens in the wake of tightening of global monetary policy”. So far in 2022, FPIs have netted $29.6 in Indian equities and debt after three consecutive years of net investment. Billions are invested, with more likely, less likely a sharp interest rate hike by the Federal Reserve to cushion four-decade high US inflation to stem the outflow of the dollar index, of six major currencies. A measure of the greenback’s value against a basket also gives the rupee a little reassurance. The index is just shy of a 20-year high hit last month, indicating that investors are betting heavily on dollar-backed assets. The rupee’s real effective exchange rate (REER), which up It provides a weighted average value with respect to a basket of currencies from major trading partners, also indicating that the Indian currency is still overvalued and has room for further depreciation. Despite Mr Das’ claim that India’s underlying fundamentals are ‘strong and resilient’ with foreign exchange reserves ‘adequate’, the RBI will need to judiciously use every dollar in its war chest to ensure that A possible slowdown in exports and sticky imports should not increase. More undue pressure on Rs.