The rupee fell to a new low of Rs 79 against the dollar today (June 28) on concerns over long-term inflation in crude oil. The RBI has been controlling losses by starting dollar sales through the bank.
Why is the rupee depreciating?
The rupee has continued to depreciate against the dollar over the past four days. Today, the rupee touched a new low of Rs 79 against the dollar. The strengthening of the US dollar is the main reason for the rupee’s decline. The value of the US dollar has touched a 20-year high as the US Federal Reserve raises interest rates. The rupee also depreciated against other major currencies, including the euro and the yen.
Two-thirds of India’s crude oil demand depends on imports. Although we currently buy oil from Russia, it is still in short supply. Most of the oil trade is in dollars. We will have to spend more rupee when the dollar strengthens. Further rise in crude oil prices will cause the current account deficit. The gap between exports and imports is called the current account deficit. This is too much. Experts believe that the fall in the value of the rupee will worsen inflation.
What is the action of RBI?
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The Reserve Bank will continue to intervene in the foreign exchange market to keep the rupee weak. Engages in dollar sales through banks. This has led to a significant fall in foreign exchange reserves. The RBI will allow the rupee to depreciate gradually as other currencies weaken against the dollar. The US-India interest rate difference will be maintained at the same level. This will prevent the rupee from depreciating further.