The rupee crossed the Rs.72 threshold against the dollar on Thursday but fell back after the Reserve Bank of India (RBI) intervened. While the rupee is not the worst performing currency in the world, it is one of the worst in Asia due to its current account deficit.
The rupee has been witnessing significant drops in the recent past. The overall decrease in the value of the rupee this year is around 12 per cent and the decrease in this month alone is 2 per cent.
While there are many reasons why the value of the rupee is falling, one of the main reasons is the fact that the weakness in other market currencies abroad pushed the value of the dollar. The other reasons for the dip in the rupee are said to be the current account deficit, outflows of foreign funds, and rising crude oil prices.
The widening of current account deficits in many emerging markets is putting pressure on their currencies. India, too, has had an increasing deficit since the beginning of the year.
Crude oil prices have also had a share in adding pressure to the domestic currency from the time the price went up to US $70 per barrel.
The Indian currency had closed at Rs.71.75 per dollar on Wednesday and opened at Rs.71.62 on Thursday in the forex market. But during the course of the day, the rupee hit an all-time-low of Rs.72.11 mid-afternoon. However, thanks to the RBI’s intervention, the currency closed at Rs.71.99 the same day.
Source: The Hindu