As soon as the market opened today, on one hand, selling pressure was seen in the shares, while on the other hand, the Indian Rupee has also fallen badly against the US Dollar. On the very first day of the new trading week, the rupee has touched its lowest level in history. On Monday, the Indian currency opened at 92.333 per dollar with a huge loss of 44 paise or about 0.60%. This decline did not stop here, rather within some time the rupee fell to an all-time low of 92.52. However, there was some recovery later.
Why is the rupee kneeling before the dollar?
The biggest reason behind this historic decline is the huge surge in international crude oil prices. The ever-deepening conflict in the Middle East and supply disruptions have shaken the global market. Due to these adverse circumstances, oil prices have reached very close to the level of $ 120 per barrel. This is a matter of great concern for countries like India, which are completely dependent on imports for their energy needs.
According to the general rule of economics, India imports most of its crude oil needs from abroad. To purchase this oil in the international market, payment has to be made in dollars. In such a situation, when oil becomes expensive in the global market, India has to spend more dollars than its treasury for this import. This unexpected demand for dollars reduces the strength of our rupee and the currency falls face down. With the increase in the Iran crisis, the fear has become stronger that there may be further obstacles in the supply of oil.
Fear of trade deficit increased
This vicious cycle of expensive oil is not limited to the foreign exchange market only. According to economic experts, the wildly rising oil prices have given rise to a huge economic uncertainty in the entire global scenario. When India has to pay more foreign exchange for imports, the country’s trade deficit starts widening rapidly. Increasing trade deficit directly means increasing need for foreign exchange, which puts more pressure on the rupee.
This entire global upheaval is going to have the biggest impact on the common man. Due to expensive crude oil and weak rupee, there is a possibility of huge increase in the prices of petrol and diesel. When fuel prices rise, transportation becomes expensive. This has a direct impact on everyday essential products and the general public has to face all-round inflation.
How will the Reserve Bank stop this decline?
The Reserve Bank of India (RBI) has been continuously taking necessary steps to manage the domestic currency in this difficult time. But, the current situation is very challenging. When the prices of crude oil are rising so rapidly in the international market, it becomes very difficult even for the Central Bank to keep the rupee completely stable. Market experts clearly believe that if this rise in crude oil continues further, the pressure on the rupee may deepen in the coming days.
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