DEPRECIATION OF THE RUPEE

May 20, 2022

The rupee closed at a record low of 77.72 against the dollar, a loss to over 6% in the last one year as it gets weighed down by rising inflation, interest rates, exit of foreign investors and plunging markets.

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Since the time Russia invaded Ukraine, the rupee has depreciated about 4% cent while currencies in other emerging markets have depreciated 4-7%.
The rupee has been hitting fresh all-time lows of late due to a rise in the dollar index and concerns around global economic growth.
The weak economic data around the world, especially in China, has put pressure on the dollar index, which hit a nearly two-decade high. Domestically, we are witnessing an outflow of funds as investors move funds to high-yielding investment instruments.
Rising import costs and a growing current account deficit have been key reasons for the weakening of the rupee. India’s merchandise trade deficit widened to $20.1 billion in April.
The depreciation is expected to impact the economy in general and various segments such as imports, mainly fuel prices, and push up inflation.

Source : Indian Express