Dollar v/s Indian Rupee
Introduction:
For the last few days, the rupee has been falling down with respect to the dollar. This fall has raised many questions, and people in India have started asking why this fall. Is there any particular reason behind the same? If yes, then what? These questions have made me write this article (with little research of course). We have a few reasons in mind — Russia v/s Ukraine or high inflation in the US, but how did these impact our rupee worth, let’s understand…
1. Global Economy
In this inter-linked world or economy, there will always be a chance that even if it's not one’s mistake they also could suffer, for instance, in the financial crisis of 2008.
India’s import is a bit higher than its export. This fact is important because, for any country to maintain its currency stabilization, exports and imports should be balanced. If exports go higher, then the currency will become stronger and vice-versa. Now, since India's import is higher and commodities like Gold, Crude oil, Chemicals, etc. are getting expensive due to inflation in the US and the war between Russia and Ukraine, India needs to import them at a higher cost, which in turn needs more Indian Rupee to get converted into US Dollar. This is making US Dollar more valuable as compared to Indian Rupee.
The solution to this can be importing less Crude oil, Gold, and other commodities, and equalizing imports and exports.
2. Inflation in the US
Investors in the US, for around 2–3 years were investing very heavily in the Indian Stock Market, due to lower interest rates by FED. Now, due to inflation has gone up to 9% in the US, FED has decided to hike up the interest rates, which gives US investors to pull out money from the Indian Stock Market and invest in the US itself.
This pulling out of money and exchange of INR for USD again became fatal for INR worth with respect to USD and again it falls down.
The main reason for INR falling down around 4% in nearly 6 months (which is like a free-fall) is that both of the above-mentioned reasons have occurred in nearly no time gap. There wasn’t any time for INR to recover from the first disaster to battle with the second.
Conclusion:
As an investor, we should always try to take the opportunity whenever it's provided for us. In my point of view, this is a good opportunity for us to invest in sectors like- power, IT, and metals, as the Indian government will try to balance exports and imports. And if they did as we are hoping, then all the above sectors will give massive returns in near future.
I hope you have enjoyed the article. Please give a CLAP if this was somewhat helpful for you. Your valuable suggestions are always welcome.
Happy Learning!!!
