Rupee may fall to the level of 80 against the dollar, why this fall is coming and what will be its effect?
Due to the continuous exit of foreign investors from the Indian market, the rupee has reached its record low several times in the last few months. Apart from the exit of FPIs, the reason for the fall in the rupee is the rise in the dollar index and the cost of crude oil. Experts said that the rupee will face challenges in the coming few months and may touch 80 levels against the US dollar in the medium term.
Rupee has been falling continuously for the last few months. The rupee stood at 73.78 a dollar on January 12, 2022 and since then it has fallen by more than Rs 5 in less than six months. It touched its all-time low of 79.11 on Friday. However, the decline has not been consistent since January 12. First it weakened to 77.13 between January 12 and March 8, and then strengthened for a month till April 5 to reach $ 75.23 per dollar. Since April 5, the rupee has seen a steady decline and since then it has touched an all-time low several times.
Why is rupee falling
The exit of foreign investment is one of the main reasons for the fall in rupee. This has been further exacerbated by the geopolitical crisis triggered by the Russo-Ukraine war and tight monetary policy by the US Federal Reserve. Apart from this, the decline can also be attributed to the rise in crude oil prices and the strengthening of the dollar. FPIs have been continuously withdrawing money from the Indian equity market since October 2021. Foreign portfolio investors (FPIs) have pulled out Rs 2.13 lakh crore from the equity market so far this year. Foreign investors pulled out Rs 51,000 crore from the Indian market in June. Anindya Banerjee of Kotak Securities has said that economic growth in India has been strong but turmoil in the global market and Fed’s hike has stopped large investments in India. Along with this, crude oil also remains above $ 100 per barrel.
Rupee will touch 80 level
Banerjee said that in the next 6-9 months, the rupee may face challenges from the slowdown in the global economy, lack of liquidity of the US dollar and high oil prices. He said that if the dollar continues to rise globally, the rupee will fall to 80.
What will be the effect
Due to falling rupee, imports will become expensive, due to which the prices of goods and services will increase further. Simply put, inflation will increase. It will also affect the students studying abroad. From here the amount that would have been sent for the first expenditure will now be less than before after the exchange. Apart from this, the current account deficit will also increase.
