Indian Rupee Falls: Amidst the worldwide uproar due to US tariffs, the biggest concern in the country is the continuous weakening of the Indian currency against the dollar. Fall in rupee has a negative impact on every sector. This year a sharp decline is being seen in the Indian currency. Amidst the uncertainties of the international market, on Friday, November 21, the rupee fell by 98 paise and closed at the level of 89.66. This is the biggest decline in a single day in the last three years.
Earlier in the year 2022, on February 24, the rupee had fallen by 99 paise in a single day. In such a situation, the question arises that what is the reason for such a fall in the rupee? Which factors are responsible for this? And why is the rupee not able to support itself against the dollar despite the efforts of RBI?
Due to fall in rupee
Dr. Aastha Ahuja, Associate Professor, Department of Economics, Artbhat College, says that in September, the rupee had reached an all-time low of 88.80 for the first time. At that time RBI had intervened. There was a perception in the market that RBI would not allow the rupee to go below 88.80. For this reason, many people started selling dollars because they believed that this level would remain stable.
But as soon as the rupee crossed 89 and crossed this “protective line”, traders moved towards stop loss. Stop loss is an order in which the security is automatically sold as soon as it falls below the fixed price.
For example, if you have bought a security at Rs 100 and have set a stop loss of Rs 90, then it will be sold as soon as the price falls to Rs 90. The same thing happened in the rupee-dollar market—as prices went down, traders increased their buying of dollars to hedge their positions, thereby strengthening the dollar further.
Stop loss is also a big reason
When short sellers buy dollars to hedge their positions, the value of the dollar increases rapidly. Many market participants believed that RBI should have intervened at this stage. However, RBI intervened only during limited trading at the level of 88.80.
Another reason is that due to high tariffs imposed by America on India, demand for imports has increased, while the supply of dollars has reduced for exporters. RBI Governor had recently said that the rupee crossed 89 the very next day after the India-US trade deal was announced.
Will the decline continue further?
On this, Dr. Aastha Ahuja says that there is still a lot of uncertainty in the Indian market. Until the trade deal is completed, the downward trend may continue. India’s trade deficit is also continuously increasing.
This is affecting not only the market but also the consumers. This has had a direct impact on students studying abroad—they are having to send more money back from their families than before. After the trade deal, the possibility of the rupee reaching the level of 87 or 86 may increase. Another reason is that whenever uncertainty increases at the international level, it has a direct impact on imports and exports. From Ukraine war to tariff war, the impact of many global events has been seen on the Indian rupee.
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