The Indian rupee fell to an all-time low for the first time in several years. The question that arose in several financial minds was – ‘Is this the fall of the Indian rupee or the rise of the American dollar?’ Many went on to mention the rising strength of the American dollar whereas many cursed the depreciation of the Indian rupee. The rupee depreciated by 44 paise. On the other hand, the American dollar rose to a strong equivalent of
$ 1 = 81.23 rupees.
Observing the trade gains, it will become difficult to gain any significant gains in such circumstances. The American dollar continues to grow stronger in the international market of trade whereas India is observing a negative trend in its domestic equities.
Rate hikes by the US fed reserve and the bank of England
This incident of depreciation and the all-time low of the Indian rupee happened on Friday. Rates were hiked by the Bank of England and the United States Federal Reserve after the Indian rupee fell terribly in the market. The United States Federal Reserve hiked its interest rates. Simultaneously, the Bank of England hiked its base rate by 50 basis points.
Problems faced by the Indian rupee
The Indian rupee is facing the third loss of the session in the context of the American dollar. The fallen rupee is also at risk due to geopolitical risks caused by the Ukrainian conflict situation. Forex traders also added that inflation has sapped risk appetite. It is unfortunate to see the Indian rupee falling down below other currencies which are strengthening day by day. India is also struggling with firm crude oil prices and risk-off moods. There may also be a global impact due to the same. Indeed, it is a worrisome situation for India.
Global pressurization and an uptrend demand for the dollar have led to the historic fall of the Indian rupee. After the fall, the flow of dollars is constantly increasing in the market. Many fear global recession and want to befriend the dollar. Big investors are trying to keep their money safe by selling. The dollar index is literally at its 20-year high.
What did the RBI do?
If the Reserve Bank of India (RBI) intervenes in the Forex market, it is possible to curb volatility. It can also help prevent sharp rupee depreciation. The Reserve Bank of India (RBI) also tried to save the rupee to a certain extent by selling off dollars.
The Sensex crashed over 1,000 points. The 30-share Bombay Stock Exchange (BSE) Sensex crashed by over 1,000 points. The 50-share NSE Nifty fell by over 300 points at the time of closing.
Apart from the Indian rupee, other currencies are also at risk due to the strength of the American Dollar. Motilal Oswal Financial Services also mentioned the same.
It is high time India takes the right steps to avoid any further Indian rupee depreciation.
What would the Indian Government and the Reserve Bank of India’s next step be to pause rupee depreciation? Would the Finance Minister of India have a say in it?
On the other hand, voting has begun in the Moscow-held regions to make them a part of Russia. Referendums follow partial mobilization. For this, the balloting process would continue for five days from Tuesday onwards. The balloting has been protested against by Ukraine as well as countries in the Western world.
Will the Indian rupee make a comeback?
It would be important to see whether the situation of the Indian rupee against the American dollar will improve post the balloting in Ukraine by Russia. Overall, India hopes to make a comeback with a stronger currency equivalence. That is what matters the most at this moment. This is a major development to watch out for Indian investors as well as citizens. The financial situation must certainly improve over a period of time if we as a nation want to sustain itself.
