InvestorQ : With the Indian rupee going beyond 80/$, do you see the situation improving or worsening from here?
Riya Dwivedi made post

With the Indian rupee going beyond 80/$, do you see the situation improving or worsening from here?

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shrinidhi Rajan answered.
3 months ago
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Now the Indian has slid beyond the 81/$ levels. The fall has been rally sharp in the last 3 days since the Fed policy was announced on Wednesday. In fact, between Thursday and Monday, the Indian rupee has slipped from 79.6/$ to 81.5/$, which is nearly a 2.5% fall in just 3 days of trading. Apart from the Fed hike, the weak dollar also raises concerns about the trade deficit and the current account deficit, which are also likely to weaken the rupee. To add to the problems, there is also importer pressure on dollar buying.

Now a rising trade deficit and a worsening current account deficit is likely to have a spiral impact on imported inflation and the value of the rupee. India imports close to 85% of daily crude oil needs and 50% of gas needs; so obviously the vulnerability is huge. To add to the problems, India’s forex kitty has fallen from $647 billion to $545 billion this year. There could be more depletion from these levels as the RBI intervenes to defend the rupee. While the RBI is in the side lines for now, it will avoid too much of rupee weakening.

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