InvestorQ : Why has the rupee weakened and once again in the last few days to close in on 80/$?
Arya Nanda made post

Why has the rupee weakened and once again in the last few days to close in on 80/$?

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Anjana Aiyar answered.
2 months ago
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After bouncing back from the 80/$ levels, the rupee has again weakened. Here is why.

a) Dollar index has rallied to a 20-year high of 109.5 recently. This strength in the dollar has been instrumental in weakening the Indian rupee and putting pressure.

b) Despite low oil prices, the OPEC is expected to tighten supply. Weak oil prices are also seen as a signal a likely slowdown in the economies due to high interest rates.

c) Markets are jittery ahead of the Jerome Powell speech at Jackson Hole. If he reiterates his intent to fight inflation, the markets are likely to be disappointed.

d) In the first 4 months of FY23, India reported a trade deficit of $99 billion and could close FY23 with a trade deficit of $300 billion. That is current account deficit at 5% of GDP.

e) A key factor has been the recent weakness in the Chinese Yuan after the PBOC cut rates to boost growth. When the Yuan weakens, the rupee is also forced to weaken to remain competitive in the global currency markets.

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