Dollar vs Rupee: In a worrisome sign for the Indian Economy, Indian Rupee plummeted to a record new low this week. On Friday, October 11, 2024, the rupee reached its lowest level against the dollar. This decline can be attributed to many factors. The Indian rupee fell below the record 84 mark against the dollar. It touched a low of 84.0525 against the dollar. Earlier, the record low was 83.9850 which was made on 12 September 2024. However, the rupee showed a slight improvement in early trade and strengthened to 83.98 against the dollar for some time with a gain of two paise, but this trend of rise did not continue on Friday. As the day progressed, the rupee slipped once again due to increasing pressure from various economic factors. Now, the question arises why the Indian rupee is falling against the Dollar? Below is what you need to know-
Effect of crude oil and stock market
As per reports, rising crude oil prices spoiled the luster of the Indian rupee. Along with this, the continuous withdrawal of foreign capital from India further affected its performance. On top of this, the stock markets have been negative since yesterday morning. Foreign investors were sellers there. This also had a bad effect on the rupee.
For the unversed, foreign investors bring in dollars to invest in India. However, they pull out the US currency in case of outflows. So, inflows raise the supply of dollars in India and hence make it cheaper as compared with the rupee, while outflows raise its demand to make it expensive. In the past nine days, FPIs have sold shares worth Rs 1.13 lakh crore, including 65,000 crore in the cash segment, in the Indian stock market. This is one of the many reasons why the Indian Rupee is weakening against the Dollar.
Other than this, rising crude oil prices and stock market instability are also the reasons why the rupee is continuously weakening. As per reports, Brent crude has jumped to $78.92 per barrel now from nearly 69 dollars on September 30. Currently, the Kuwaiti dinar is the strongest currency in the world.
How China is also one of the reasons for the Indian Rupee falling?
China recently included 10 basis points policy rate cut and a 50 basis point reduction in the cash reserve ratio. This move by China is also causing foreign investors to move to Chinese equity markets as they have cheaper valuations. According to Bloomberg, China may unveil another 2 trillion yuan ($283 billion) fresh fiscal stimulus on Saturday to shore up its economy.